Financial mis-selling scandals can generally be spotted in advance. Not by everyone perhaps, but there are insiders, people in the industry who can see it happening, as it happens. I speak from 40 years\u2019 experience working in financial services, most of it in pensions.\u00a0<\/p>\n
Non-advised (also known as execution only) pension drawdown \u2014 a way of taking income from your pension pot while leaving it invested \u2014 has all the hallmarks of the next mis-selling problem, which will emerge over the next few years.<\/p>\n
The problems started in 2015 when the government introduced pension freedoms. This hugely popular rule change allowed those who had built up a retirement pot of money to have largely unrestricted access to the funds, including cashing it all in at once. The message was, and still is, \u201cit\u2019s your money, we trust you to spend it as you see fit\u201d. In principle this is a good philosophy. There are problems though, with how it plays out.<\/p>\n
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Firstly, this is harder than it looks. The challenge of how to manage a finite investment pot through retirement, maximising your standard of living but without running out of money, is the financial equivalent of repeatedly trying to thread a needle while riding a rollercoaster. The uncertainties of investment returns, inflation and life expectancy make it almost impossible to succeed.<\/p>\n
Everyone\u2019s situation in retirement is unique. You may own a home, have a guaranteed final salary pension, or have a small defined contribution pension pot; you may be married and your partner may or may not have a generous pension and you, or they, may not be in good health. So it\u2019s not just about the pot of money you have in your retirement plan. It\u2019s about how that pot of money fits into your wider circumstances.<\/p>\n