Advisers believe Brexit increases drawdown risk

Its research shows advisers expect annuity rates to fall further as providers pull out of the market while stock market volatility will increase the risks of drawdown as the UK prepares to negotiate its exit from the European Union.

Around 72% of advisers believe annuity income – which has already fallen 6.3% after the EU Leave vote – will continue to slide, while 73% are concerned about the impact of investment market volatility on drawdown as a result of Brexit.

Most at risk are savers who are five years from retirement - more than a quarter of advisers (27%) are recommending they need guarantees to protect their funds. That is being reflected in rising sales of guaranteed retirement income solutions which are building on a 17% increase in the first three months of this year.  

MetLife believes that Pensions and Lifetime Savings Association research showing 53% of savers considering drawdown think it guarantees an income for life highlights the need for advisers to focus on flexible guaranteed drawdown solutions as an alternative.  

Simon Massey, Wealth Management Director at MetLife UK, said: “Lack of consumer choice and understanding is a real threat to the success of pension freedoms as savers who want guaranteed income are being driven into traditional drawdown without understanding the risks.

“Pension freedoms have been a major success story so far but there needs to be more innovation to provide a wider choice of options to ensure savers can benefit from flexibility while retaining certainty over their income. One thing is certain – with today’s low interest rates and ongoing investment market volatility, the need for a guaranteed income has never been more important.”