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07/12/2007 - Pensions advice must reflect changing lifestyles

Pensions advice must reflect changing lifestyles

03/12/2007 Adver

The advice given to pension investors by independent financial advisors (IFAs) should reflect the changing lifestyles of today's older generation, new research suggests.

Technology solutions firm Vertex Life, Pensions & Distribution believes traditional advice which focuses on asset accumulation and protection of assets is outdated and IFAs should change the way they assess their clients' retirement needs, ifaonline.co.uk reports.

In the past retirement advice has primarily centred on the desire to accumulate assets and savings in order to purchase an annuity which will provide a guaranteed income through retirement, Vertex points out.

Now however, social and demographic changes such as growing wealth and increased life expectancy, as well as changes to pension legislation and innovation in the pensions market, mean savers are looking for new ways to make the most of their money.

The growing popularity of self-invested personal pensions (Sipps) for example is testament to this. Since April last year when the government essentially broadened the range of investments that could be held within a Sipp, sales of these products have soared.

They have proven extremely popular, particularly among wealthy investors with multiple pension pots, as they offer freedom to pursue an investment strategy that is uniquely tailored to an individual's retirement needs and objectives.

This demand for increased flexibility from pension investors means IFAs now need to re-examine the way in which they assess their clients' pension requirements, Vertex Life believes.

And it claims that in order to do so they need to be provided with better support and planning tools so they can offer tailored advice without getting bogged down.

It also says that more innovation is needed in the development of new pension products so that the retirement solutions on offer more accurately reflect the needs of today's maturing population.

In particular, there is a need for new products to meet the demand of people between semi-retirement and asset crystallisation, as changes in lifestyles are leading to more years spent in retirement which in turn leads to demand for less rigid products.

Indeed, the research shows that 72 per cent of IFAs think their customers want freedom to make decisions on their retirement planning at different points in their lives and will not all be looking for similar products when they reach similar ages.

Paul Ayres, head of propositions at Vertex Life, Pensions and Distribution, told ifaonline.co.uk that the pensions market is undergoing "considerable change" at the moment.

This is due to new legislation introduced on A-Day, including the treating customers fairly legislation, longer life expectancy and increased competition among providers.

"Helping the individual make choices in their maturing years requires a very different set of advice tools than those historically focused on asset accumulation and protection," he explained.

"Helping this to be a phased and cyclical set of decision points is also important and a real opportunity for our industry to provide real value.

"But the financial advice process and the financial product offerings need to change and adapt to a fundamentally different set of social and financial needs if this is to happen."

He said that Vertex Life believes both of these are in need of "major development and innovation".

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