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Pension freedoms could leave people struggling in later life

The Institute and Faculty of Actuaries (IFoA) has submitted its response on pension freedoms to the Work and Pensions Select Committee. We welcome and support this inquiry as we are concerned about the significant amount of responsibility placed on individuals managing their income in retirement as a result of the freedoms.

IFoA President Marjorie Ngwenya, said:

“The reforms introduced in 2015 are leaving people to manage their own longevity risk, which is an extremely complex process for an individual. Our recent survey [2] showed 60% of respondents had not thought about what they would do if they lived longer than they expected to, and a further 26% had thought about it, but not made any plans to deal with it. Yet the increasing number of people opting for drawdown means they are having to grapple with difficult considerations such as how much is a sustainable amount to withdraw and how long they will need their pension to last.”

“If individuals do not have protection against living longer than they expected, the repercussions could be significant and wide reaching, leaving pensioners without sufficient income to meet their basic needs in the latest stages of their lives. Ensuring that consumer protections are in place and establishing mechanisms for pooling of risk within this new environment will be key to the success of these reforms.”

“We understand that individuals may not want or be able to pay for advice, but take up of free guidance is very low and the reasons for this must be explored in order to encourage people to access available support. In an earlier IFoA survey [3], 45% of respondents did not understand the difference between free guidance and regulated financial advice that must be paid for. Auto-enrolling individuals into a free guidance session before funds are accessed could help to increase take-up.”


Editorial notes:

  1. IFoA response to the Work and Pensions Select Committee’s Pension freedoms inquiry
  2. Retirement Readiness: Survey Report from Australia, the United Kingdom and the United States, October 2017
  3. IFoA Freedom and Choice: Public Attitudes 1 year on. April 2016

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest. 

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.

Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.

The IFoA is available to provide independent expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.

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