The Pensions Freedom Index has proved itself to be an excellent predictor of the outcomes from pension freedom. In the first quarter’s results, although flexible income unsurprisingly surged (it had not been an option previously for most retirees), interest in guaranteed income was still strong. In addition the numbers interested in cashing their pension pots has remained remarkably stable – in the range 10% to 14% over the course of the year.
Another clear finding from the first year of the Pensions Freedom Index is the repeated increase in popularity of annuities every time there is a period of volatility in equity markets. In the run up to the referendum (and if Brexit does happen), don’t be surprised to discover that annuities become the most popular option for retirees.
And the future? Generation Y has consistently shown itself to be more cautious than Generation X and their “Boomer” parents. This caution may be the result of the turbulent economic times that Generation Y has lived through compared with the relatively benign markets of the past when high risk strategies were not needed to achieve good long term investment returns. Today there are relatively few product solutions combining flexible income with guarantees. Those that are available today have proved popular and so over time we should expect to see many more variable annuities and other innovative products offering short or long term guaranteed income.
Download the Pensions Freedom Index report for more insight into the choices consumers are making.