There are mixed views on whether the new investment pathways, which go live today, will change demand for retirement advice, according to a new survey.
Aegon found that almost one in two financial advisers (44 per cent) said these investment pathways will have no effect on demand.
A third (32 per cent) said they thought it would reduce demand for their services, with 1 per cent saying it would reduce demand significantly.
However one in 10 (11 per cent) were more optimistic saying these new pathways should increase demand for retirement advice.
From February 1 pension providers have to offer four ‘retirement pathways’ for DC customers who opt for drawdown without advice. Customers will be asked to identify which of four retirement scenarios best matches their plans on using their pension funds over the next five years.
Their pension provider must make available a range of four investment strategies designed to be broadly appropriate for these scenarios.
However, individuals then have to chose which strategy they want, or which combination of pathways, or whether they want to pick from a wider range of investment funds on offer.
The four scenarios are:
- I have no plans to touch my money in the next five years.
- I plan to use my money to set up a guaranteed income (annuity) within the next five years.
- I plan to start taking my money as a long-term income within the next five years.
- I plan to take out all my money within the next five years.
Aegon pensions director Steven Cameron says: “Pensions providers go live on 1 February with investment pathways for non-advised drawdown customers.
“The idea behind these pathways is to help reduce the potential for non-advised individuals to make unwise investment choices, such as taking on too much or too little investment risk.
“However, it will not provide any help in deciding how much income to take, and unlike with advice, there’s no ‘personal recommendation’ of which pathway to choose. Going back five years, very few individuals considered drawdown without first seeking professional advice but the financial regulator has been concerned that many more are now opting for drawdown without advice.”
He adds: “Our research shows that advisers have mixed views about whether pathways will lead to more or fewer individuals seeking retirement advice. This is perhaps to be expected as much will depend on how pathways are presented and explained to customers, which won’t be clear until they are up and running.
“While investment pathways will offer some help to those who choose to ‘go it alone’, it’s really important for those approaching retirement to understand that they won’t replace the benefits of taking professional financial advice.”