SAVERS ‘BANKING ON ISAs FOR MOST OF THEIR RETIREMENT INCOME’
March 14, 2017
- One in three say ISAs are a better bet than pensions but worry about real savings choice
- Two-thirds of ISA savers only use cash ISAs and just one in 10 are happy with the rates they earn
More than one in three retirement savers are planning to rely on ISAs for the bulk of their retirement income but there are real worries about the lack of savings choice, new research* from MetLife shows.
Its study found 34% of savers are looking to ISAs to deliver the majority of guaranteed income in retirement highlighting the growing interest in exploring a wide range of options to deliver certainty and flexibility over funds. Even among over-55s, who are in the run-up to retirement, more than a quarter (28%) is considering using ISAs.
However, the research reveals real worries about the lack of awareness of available options for ISA savers – more than two-thirds (66%) only save into cash ISAs and just 10% say they are happy with the rates they receive and more than half of cash ISA savers (55%) are dissatisfied with their rates. Best fixed-rate cash ISAs currently pay around 1.75%** - just above inflation.
The increased interest in ISAs for retirement planning is being driven by a switch in attitudes following the launch of pension freedoms and increases in subscription limits with financial advisers welcoming the new flexibility.
MetLife’s study** found 63% of retirement specialist advisers have changed their recommendations on using ISAs for retirement planning. Around 21% of pension savers say they are making more use of ISAs for retirement planning following pension freedoms. But MetLife is warning that a lack of real savings choice means that people are unaware of some of the options available to boost their pensions.
Simon Massey, Wealth Management Director at MetLife UK said: “The increase in annual ISA subscription limits from £15,240 to £20,000 in April this year highlights how much can be saved tax-free and makes them a real option for retirement planning.
“But it is worrying that with so much ISA saving focused on cash ISAs that so few savers are happy with the rates they are earning. However, it’s understandable than many are nervous about investing their money in a traditional stocks & shares ISA when markets are uncertain.
“The ISA market attracted more than £58 billion in contributions last year and the rise in contribution levels will provide another boost, but there has to be real choice aside from the higher return but riskier stocks & shares ISAs and the low rates of cash ISAs.”
MetLife’s Guaranteed ISA comes with an income or capital guarantee enabling savers to benefit from greater certainty over their investments or future income while still having the potential for growth.
Savers benefit from a guaranteed income for life or guaranteed lump sum at the end of a chosen term, regardless of market fluctuations. Savers also retain access to their funds when they are needed and are provided with a guaranteed death benefit. The initial minimum investment in the Guaranteed ISA is £15,000.
Notes to Editors
- * Research carried out by Consumer Intelligence using an online methodology to question 1,071 employed adults aged 18-plus. Fieldwork was carried out between January 30th and February 2nd 2017
- ** https://moneyfacts.co.uk/isa/fixed-rate-isa/
- *** Research carried out by Pollright among a sample of 107 specialist retirement advisers in February 2017
- The value of your investment, and any income taken from it, can go down as well as up and you may get back less than you invested.
- The MetLife Secure Capital Option provides a guaranteed death benefit or amount at the end of a chosen term. If you switch out or cash in your investment before the end of this term, you will receive the underlying value of your investment.
- The MetLife Secure Income Option provides a guaranteed level of income for life and death benefit. If you switch out or cash in your investment you will receive the underlying value of your investment.
- Any payment you ask MetLife to make from your policy to a Financial Adviser will reduce the value of your investment, and proportionately, any amounts guaranteed. Although you can access the funds at any time, you should consider a MetLife ISA Portfolio as a medium to long-term investment, ideally five years or more.
- Tax treatment depends on your individual circumstances and may be subject to change in the future, with or without notice.
The references to “MetLife” are general references to the group as a whole and not to specific entities within the group. MetLife in the UK comprises a number of different companies.
MetLife Europe d.a.c. is an Irish insurance company based in Dublin with Dirk Ostijn as Chief Executive Officer. MetLife Europe d.a.c. provides financial products into the UK via its UK branch, of which Dominic Grinstead is the branch manager.
MetLife Europe Services Limited is an Irish services company, which distributes MetLife Europe d.a.c.’s products to Independent Financial Advisers via its UK branch. Key personnel within the UK branch of MetLife Europe Services Limited are Simon Massey, Wealth Management Director, Tom Gaynor, Employee Benefits Director and Claire Oldstein, Marketing Director.
MetLife Europe d.a.c. (415123) and MetLife Europe Services Limited (472359) are incorporated in Ireland and are authorised by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. The registered address of both companies is 20 on Hatch, Lower Hatch Street, Dublin 2, Ireland and the UK branch address for both companies is One Canada Square, Canary Wharf, London E14 5AA. Website: http://www.metlife.co.uk
MetLife Europe d.a.c. is affiliated with US-based MetLife, Inc. (NYSE: MET), which through its subsidiaries and affiliates (“MetLife”), is one of the largest life insurance companies in the world. Founded in 1868, MetLife is a global provider of life insurance, annuities, employee benefits and asset management. Serving approximately 100 million customers, MetLife has operations in nearly 50 countries and holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.