Keith Churchouse: My name’s Keith Churchouse, I run a company called Chapters Financial. We’re based here in Guilford and we cover Surrey, Sussex, and Kent. It’s our 15th anniversary this year, we’re chartered financial planners, and I’m also a fellow of both the personal Finance Society and also the CISI.
We normally do it via diagram and just to take them through the process of retirement planning from where their existing pension benefits are, whether they want to take a tax-free cash, whether they want to consider an annuity purchase, or whether they want to consider things like income drawdown or a bit of both. Also, whether there are important issues within their policy, such as guarantees that might have greater value than the flexibility of an income drawdown.
The death benefits, the way income can be produced, and also, the way that maybe they would want their overall benefits to pass on at a future time, again, sort of, death benefits. The flexibility is key. Historically, annuity rates have not been high for many years. That doesn’t mean that in years to come annuity rates will rise and the advantage of an income drawdown is that we can switch to an annuity at a later date, and that’s something that we’re adding into our text with clients, in the fact that later on we may still consider an annuity.
Flexibilities are good, but there are some downsides, charges on income drawdowns can be high. If a client wants to take an unreasonably high level of income drawdown, then they’re going to be depleting their fund. Can they cope with that risk? It is a retirement product, it’s there to provide income for the balance of your life.
There is a huge concern that people will draw too much from their funds and will run out. Who wants to go back to work at the age of 80, having had 15 years off? So, we need to balance the flexibility with protecting clients from, in principle, themselves, that they could take too much from the pot and find themselves later on with no money.