UK - Poor advice has cost thousands of scheme members higher retirement incomes, Tillinghast-Towers Perrin claims.
The actuarial and management consultant says investment-linked annuities or income drawdown policies provide a greater income in retirement but scheme members do not receive realistic projection advice for with-profit and unit-linked investment annuities.
Principal Bruce Moss said advisers needed to make greater use of stochastic modelling – a statistical technique for risk assessment – when advising clients on their retirement income options.
He added: “These enable customers to have a much better understanding of the relationship between the risk and reward of different investment strategies, which could dramatically change the perception they have of the various options.”
“Opting for an investment-linked annuity or income drawdown policy obviously increases the level of risk you are undertaking but it also improves your chances of receiving a larger income in retirement.”
Tillinghast – which provides an online advice system based on stochastic modelling – urged the financial services industry to make future projections more realistic and give customers a better view of the risks.
It is available to product providers, financial advisers and employers who wish to provide tools for staff to use when making financial decisions.
The system – EValue – focuses on retirement planning and other financial goals including planning for school fees, mortgage repayments and maximising income in retirement.
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