The retirement market is in need of a fresh approach with an independent review of the decumulation sector, warns a new report by the Association of Independent Financial Advisers (AIFA) and Prudential UK.

The study, Financial Planning through Retirement, recommends changes to the Government, pension providers and independent financial advisers (IFA) to ensure that UK's employees make the most of their income and wealth in retirement.

Employers and the Government, the report says, should play a greater role in encouraging independent financial advice in the workplace, and the current £150 per year tax exemption for advice to employees should be better funded, facilitated and promoted. Education, clearer guidance, and flexibility are also recommended, as well as the recognition that the decumulation market is a complex one in its own right, separate from others.

"There must be a holistic approach to the decumulation market from industry, Government and regulators to ensure that more people maximise their income and wealth in retirement," explained Chris Cummings, director general at the AIFA. "We must make sure that consumers can access good, professional advice when needed and that the industry can provide access to a wide range of services and products to utilise the variety of assets retirees now have.

"It is clear that consumers will understand the risks and rewards of decumulation products better if they are described in consistent language."

Cummings said the research showed that 56 per cent of respondents do not understand financial services language, highlighting the need for a glossary of terms that will explain them.

Prudential's managing director, retail life and pensions, Barry O'Dwyer, added: "The population is getting older and people are living longer. For most people, investing a relatively small amount of time in seeking out financial advice about retirement is one of the best decisions they will ever make. This applies to pensions and annuities, but also increasingly to non-pension wealth including property, where we are calling on Ministers to ensure that consumers can release adequate amounts of equity from their home without losing means-tested benefits."

The project and report was supervised by an editorial board comprising of representatives from the parliamentary, business, consumer and academic worlds.

- Pensions Age June 2009

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