Market comment

For professional advisers only

Auto enrolment into Personal Accounts

09 November 2009 | Back
Commenting on the end of the consultation period on auto enrolment into Personal Accounts, Living Time's Dave Harris says: "There is no doubt that auto-enrolment will have a significant effect on the retirement landscape.

"The Pensions Policy Institute has stated that auto-enrolment combined with the continued shift from defined benefit (DB) to defined contribution (DC) in the private sector, will see around 10 million more savers enrolled into DC arrangements over the next decade.*

"This growth in DC pensions means many more people are going to be converting pension pots into retirement income and will need to ensure they have the right annuity and retirement products for their needs.

"With the many different types of retirement income plan available, retirees will require advice on planning the level of control and flexibility they want in their retirement, as well as the best annuity rate for a period in their life which, given increasingly longevity, could last 30-40 years.

"Additionally, with the move from DB to DC, more and more people are likely to have complex combinations of income and assets on which to draw in the future; this could include state pension entitlement, residual DB pension entitlement, DC pension savings, other financial savings and assets, housing assets and, as people find they may want to continue working past the age of 65, earnings.

"Retirement planning has to take into account the accumulation phase and actively prepare for the decumulation phase if it is to be truly holistic.

"Fixed term annuities, which pay an income on a par with the best lifetime annuities at a similar low cost but for a defined period of time, allow people to take an income without committing to a lifetime annuity rate. This means they can better control their finances and make best use of other asset and income streams as they become available to them."

* PPI report on Retirement income and assets: How can pensions and financial assets support retirement? 23 October 2009