Advisers need to make sure the selection of their clients' pension products is kept up to date so they have access to the full benefits of the product for intergenerational planning, according to the latest edition of the FTAdviser In Focus podcast.
Speaking on the podcast, Gareth Davies, pension specialist at Scottish Widows, said the freedom and choice reforms of 2015 had meant that for many pensions were seen as similar to family trusts.
But he cautioned: "It is important the product selection is kept up to date. We all talk about flexi-access drawdown as the clients are approaching the time when they are going to start taking income from their pension.
"But probably a more pertinent reason why flexi-access drawdown is important is because it enables beneficiaries flexi-access drawdown on the death of the client and if that isn't an option before the client dies it is impossible to effect the transfer post death to create that option.
"So if the client is maybe in an older, legacy product that is effectively an accumulation-only product that is a significant risk baring in mind none of us know when we are going to die."
He said the only option in that scenario would be a return of funds and highlighted how it could be "pretty jolly difficult" to get assets back into a pension wrapper quickly once they are out.
Davies said the increased ability to cascade wealth down through the generations since 2015 was one of the reasons savers were increasingly "looked at their options outside of defined benefit pensions".
Heather Owen, a paraplanner at Quilter who appeared on the podcast with Davies, said: "Particularly since 2015, since the freedoms came into force, they have played a much bigger role in passing on wealth between generations.
"They are great investment vehicles in themselves. You get tax relief on the way in, you've got the 25 per cent tax free cash. I think one of the really crucial benefits to using pensions in terms of intergenerational planning is the members retain the full control over the pension whilst they are alive which is a big difference when you compare them to trusts, for example."
To listen to the full podcast click play on the player above. FTAdviser's podcasts are also available on Apple Podcasts, Spotify, Stitcher and Acast.
damian.fantato@ft.com
