FSA reduces pension projections
The Financial Services Authority’s (FSA) recent reduction in its standard pension projection rates must act as “a wake-up call” for investors and the government .
The regulator confirmed that it is to reduce the intermediate projection rate for pensions from 7 per cent to 5 per cent from 2014. This, according to the FSA, will give investors more realistic expectations on potential returns. It is the first time the rates have been adjusted since 1999.
The regulator’s move should ‘shock’ pension scheme members into increasing their contributions so they can look forward to a comfortable retirement. But for many people the standard projections mean little, fuelling real concerns that people could hit retirement age with considerably less in their pension pots than they had expected.
I believe that the government and the financial advice industry must work more closely together to bolster the UK’s savings culture.
The most effective way to achieve a cultural shift in the desire to put more aside for retirement would be for the State and the financial services industry to work together to promote it. Studies prove that those who seek financial planning advice are more likely to embrace this idea and, subsequently, more likely to enjoy a retirement free of financial crises. This is clearly beneficial for the individual but also for the country as a whole.
Nigel Green deVere Group
Blog written on November 5th 2012