Summary of recommendations
The editorial board set out three key recommendations as a result of the income and wealth in retirement report.
Firstly, the government and regulators should ensure financial education initiatives make consumers aware of the need to take 'ownership' for their financial well-being in retirement. This information needs to be pitched at different sectors of the population accordingly and take behavioural economic factors into account.
Also key is the recognition of the decumulation market in its own right. Government departments and regulators need a common objective and approach, and the board believes an independent review should be commissioned by the government to achieve this aim.
Thirdly, clear direction should be given to all those who provide advice and guidance to consumers about what decumulation is, to ensure they receive consistent information in a suitable language, whenever they have contact with the financial services industry.
The board also made the following specific recommendations to help ensure the industry meets future demand for retirement advice and products.
Consumer:
- Regulation and legislation should be based on how consumers behave rather than how perfectly rational consumers would behave.
- There should be a review of financial capability programmes to ensure they are improving financial education levels as cost-effectively as possible.
Employers:
- Independent financial advice in the workplace should be better promoted and funded by the government and employers.
Advisers:
- Clear guidance and training is needed for those who provide decumulation advice.
Product providers:
- There is a need for relatively simple products that can be understood by the consumer with little or no financial advice.
- Product providers should adopt a consistent approach to product features, product suitability, product comparisons, and risk and rewards. An industry standard glossary of terms should also be agreed.
Legislation and regulation:
- Equity release regulation should be amended to allow greater consumer access to advice.
- The level of capital disregarded for retirement means-tested benefits should be reviewed on a regular basis to ensure the rules do not penalise equity release.
- Age 75 annuitisation rules should be independently reviewed to ensure they appropriately balance the needs of retirees with the interests of taxpayers.
- Critical success measures for the retail distribution review should be that it increases the availability of advice and guidance and raises the level of engagement with consumers.
- An independent review is needed to deliver institutional arrangements that ensure a joined-up regulatory and public policy approach to decumulation.
