Pension Perspectives: Henry Tapper of First Actuarial and the Pension Playpen
27 Nov 2014 | COMMENTS: 0 | Author: Ryan Smith | General
Henry Tapper is Business Development Director at First Actuarial, and founder of the Pension Playpen. His popular pensions and retirement blog has been described as ‘one of the ten websites every investor should bookmark’.
LFA: In brief, how has the annuity market changed in 2014?
HT: The numbers of annuities purchased has dropped by 46% since the pension reforms were announced back in March. People no longer feel they have to buy an annuity, they are looking forward to using tools like flexible drawdown to treat their pension more like a bank account.
LFA: What changes do you expect to see in 2015?
HT: I expect to see new collective drawdown products radically reducing the cost of being paid from your pension fund, talk of collective defined contribution in 2016, a small number of people taking advantage of the government’s Guidance Guarantee and a lot of noise about mis-buying.
LFA: Do you think the changes are a positive thing for retirees?
HT: Yes – so long as people engage, get educated and are empowered to make informed decisions
LFA: Is there still a place for annuities in the retirement market?
HT: Yes- especially for those looking for certainty in the final phase of their lifespan.
LFA: When announcing the pension reforms earlier this year, George Osborne stated that as a result of these changes “Nobody will have to buy an annuity”. Would you agree with this analysis?
HT: Obviously nobody has had to buy an annuity for a number of years, but that’s being pedantic- the point is that now people have much more flexibility – so in that sense George Osborne was right.
LFA: What can annuity providers do to make annuities more attractive to retirees?
HT: The most important thing providers can do to make annuities more attractive is to find ways to improve the rates.
LFA: What are the main things that people due to retire in the next 12 months need to consider when it comes to turning their private pensions into a retirement income?
HT: The most important thing people should consider is the risk of a significant income shortfall when they get to a point when they can’t earn any more. Retirees need to make informed preparations to ensure that they have enough money to live comfortably on.
LFA: Many retirees still prioritise the relative security and reliability of annuities over more high-risk retirement income options. What would you say to these people?
HT: There’s no problem with that- so long as you understand what you are paying for – security and reliability, not flexibility.