ABI interested in retirement information.

SallyG

https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/A-new-retirement/Call-for-evidence


https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/A-new-retirement/Consumer-survey

jamesd

At the end of the consumer survey there is an opportunity for freeform comments. Here are the comments I made:

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In the context of planning to retire at 55 or later if targets not met the key concerns for me are:

1. The GAD limit. My target is level income from retiring until after the state pensions start at least 13 years later. That requires a higher than GAD capital drawing rate to provide 40% of my income until the state pensions start. That in turn forces me to use non-pension investing for this portion of the drawdown need. A limit that forces me not to use pensions for retirement income planning is frustrating.
2. Legislative risk like the dropping of the GAD multiplier from 120% to 100%. This again forces me to use non-pension investing to protect against this risk.
3. Legislation risk in the form of the GAD limit calculation that magnifies the effect of market drops by potentially calculating once and having the income 40% lower for three years. To protect against this I can try to crystalise in three pots with different calculation dates and I also again end up forced to use non-pension vehicles to help protect against it. I have to plan for smooth income, so can the GAD limit and it should not drop suddenly due to semi-random market variations.
4. FCA regulation that has discouraged mortgage lending into retirement. This means that I need to plan to clear an interest only mortgage at around the time of my peak financial stress, just before the state pensions start and would make it much easier to do. Interest only because I know that investment returns are likely to exceed mortgage costs and I'm comfortable with investment risk and managing it.
5. There is a chance that I may need care in later life. It is certain that when using drawdown I must plan to have lots of capital at that time to provide for the long life income need. But at this time I can't easily use the drawdown pot I will no longer need to pay for the care that I would need for only a few years. So I have to waste money providing for two alternatives independently when only one of them is at all likely happen, barring a need for care just before reaching age 110 or so, my long life planning horizon.
6. Annuities have largely priced themselves out of consideration now I have a choice. The regulatory capital protection and absolute guarantee of 100% income means they are not locking in the worst possible income result compared to drawdown but not letting me have any of the income upside in less pessimistic conditions. Products that allowed a 20% drop in income in the unlikely event of long term sustained market drops would significantly increase the chance of me using annuities, if income ended up closer to drawdown levels. I don't have a 100% income need, I can and will adjust my spending. So I don't want to pay a high premium to buy a product that provides protection I don't need, while costing me half of my normal to good case income.
7. ABI members are competitors or counterparties to me, seeking a cut of my retirement income that decreases it. But at least ABI members are likely to come up with something better than the DC- (not +, it reduces DC income levels) proposals just made by this government.

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