Retirement provision has traditionally been regarded as consisting of
two distinct phases – accumulation (while you save money for retirement) and
decumulation (when you use the money you have saved to provide you with your
income and lifestyle in retirement).
Traditionally most people are more interested in accumulation and the
tax reliefs available from HMRC. The focus of the recent budget proposals has
been more on the decumulation phase. The biggest headline winner is that from
April 2015, there will no longer be a need to purchase an annuity. This
has generated a huge amount of comment in the press, and is bringing about a
lot of exciting advances from providers of financial products.
New financial products are being devised with the objective of combining
the certainty of annuities with the flexibility of investment products. These
offer innovative solutions, however we are of the opinion that the charges for
these (especially in the formative years as there is less competition) could be
a major factor for many people.
Interestingly, annuities could still form a part of people’s retirement
income plans, as it seems likely that many people will continue to seek the
security of the guaranteed income they provide - particularly for example if
they have a medical condition that can potentially entitle them to the
increased income available from enhanced annuities.
What is clear is that on-going financial planning advice in both the
accumulation and decumulation phases will be of importance for all to maximise
the potential from their wealth.
Duncan Wilson
Private Client Partner
Telephone: +44
(0)20 7893 3456
Email: getintouch [@] broadstoneltd.co.uk
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