Just Retirement weighs up pros and cons of unsecured pensions

Just Retirement, one of the UK's leading providers of retirement solutions, has issued a number of clear guidelines for advisers to use when consulting with clients on retirement income options.

Advising on the best form of retirement income can be difficult at the best of times as there is no one-size-fits-all solution but, in the current economic climate, consumers are even more concerned about how to get the most from their pension pot. To help advisers navigate their way through the retirement minefield Just Retirement has launched a guide on unsecured pensions (USPs) and annuities which is available to all IFAs who sign up for the Campaign for Better Annuities. Just Retirement acknowledges that the flexibility of a USP is attractive to retirees, together with the prospect for strong investment returns, increasing income levels and tax planning opportunities.

However, Just Retirement estimates that customers will need at least £300,000 in their pension pot to maximise the opportunities available in a USP. This only applies to relatively few retirees and, as the average fund at retirement is £25,000, the vast majority of people who need the certainty of a regular income should consider committing to a lifetime annuity. These provide a risk free guaranteed income for life and, if the client cannot afford to take chances in retirement, then an annuity is probably the better option.

Nigel Barlow, Head of Retirement Income Solutions at Just Retirement comments: "The flexibility of USP is, on the face of it, attractive. It is important to remember, however, that this will only really benefit those with a relatively substantial pension fund. Furthermore, the potential for strong investment returns may not always work in the individual's favour, for as we have seen recently, sudden downturns in performance can drastically reduce sustainable income levels for very long and unspecified periods of time.

Barlow continues: "Annuities can bring much greater peace of mind to individuals due to decreased risk. In addition to this a person's state of health and their circumstances could enable them to qualify for an enhanced annuity, thus producing a higher level of income than a standard annuity but with the same guarantees and with the avoidance of risk of a USP.

"This is clearly an area for individual advice but in today's market the very real benefits of an annuity should not be overlooked - at any age."