Actuaries have today said that people coming up to their retirement would benefit from comprehensive information about how to use their savings, following government proposals on pension guidance.
The Institute and Faculty of Actuaries (IFoA) said it was important for consumers to be aware of the complex financial decisions they were making, and the risks they could face in retirement such as running out of money.
IFoA's comments have been published following the Financial Conduct Authority's consultation on its Retirement reforms and the guidance guarantee paper, which is intended to take forward the government's pledge for free and impartial retirement advice after reforms removed the need for people to buy an annuity with their pension savings. The deadline for submissions to the consultation was on Monday.
Nick Salter, president of the institute, said: 'The introduction of greater freedom and choice in accessing pension funds means that consumers are likely to benefit most if they receive comprehensive information about their retirement savings that reflects their wider financial and personal circumstances.
'This presents a number of challenges that Treasury, the FCA, delivery partners and pension providers will need to overcome.'
He said there were a number of issues that needed to be covered in the advice sessions to ensure customers were protected.
As a minimum requirement the guidance should cover life expectancy, the danger of running out of money during retirement, possible long-term care needs, and investment risk, the institute recommended.
However, it also warned that people should not plan their retirement based on average life expectancy alone as it could leave them short of money if their actual lifetime was longer than average.
Salter said: 'People need to plan appropriately to make sure their income covers their actual lifetime. There is a danger that they might rely too much on average life expectancy and misunderstand what this actually represents.
'It is important that the combination of requiring people to pull together significant amounts of information and then asking them to use it to make complex decisions involving unfamiliar concepts does overwhelm individuals.'
He also noted that the guidance needed to be both understandable and accessible to a diverse range of audiences, including those who would otherwise be least likely to seek it.
