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In the back [ PLATFORMS & PENSIONS ]
John Blowers says that unless the industry provides more assistance,
giving the non-financially literate control of their pension when they
retire is a recipe for disaster
The price of freedom
It has been more than six years
since the radical overhaul of our
pension system, now referred to
as pension freedoms.
And while it has been a boon for many
retirees, it has also caused significant
problems, particularly for the less
affluent and non-financially literate.
After all this time, I would have
expected the industry to have solved
the dilemma of how we access and
deploy our pension pots when we retire.
There is a lack of assistance from
commercial institutions and a
smattering of help from the likes of the
Pensions Advisory Service and Money
Advice Service (recently merged into
the Money and Pensions Service).
Essentially, if you don’t pay for the
services of a financial adviser, you’re
on your own.
This is a new problem for us Brits.
In the past, if you had a defined
contribution scheme, you would be
dispatched by your pension provider
at retirement to purchase an annuity.
You were offered an income for life
in exchange for your entire pension
pot which, coupled with the state
pension, was all you had to live on.
Not great, but simple.
Now defined contribution schemes
are effectively pots of money that
do not come with any promises.
What you save up and invest is what
Now defined contribution
schemes are effectively
pots of money that do not
come with any promises.
What you save up and
invest is what you receive
at retirement
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