Moderator: Jim Best – Just Retirement
Expert: Dom Sherry – Just Retirement
Key Message
The introduction of Pension Freedoms following the Budget of March 2014 has shaken behaviours, attitudes and commercial models. How we an industry respond to the needs of the individual, learn from good practice from other sectors and implement this in customer centric propositions will be key to our success.
Headlines
- In order to capitalise on the huge opportunity we must understand this cohort in more detail than we ever have before.
- Changing priorities and greater financial freedom lead to a more complex set of requirements.
- We as an industry need to be innovative rather than trying to shoehorn legacy models and products in the new world in which we now operate.
Key Themes
Whilst the introduction of Pension Freedoms has undoubtedly increased consumer engagement in pensions, and the options now available to them, it is clear that the level of understanding of the rules and implications remains extremely low. Evidence from the ABI suggests that on the whole people are making sensible decisions in not taking all the money at outset however long term outcomes are far from certain.
Where responsibility for educating people lies and how this is implemented remain a topic of hot debate. Whilst it is agreed that those whom are better informed and more engaged achieve better outcomes how best to deliver this is complicated. The commercial opportunities of an informed demographic are clear, the over 50s control £6.2 trillion of UK wealth, but the social need should also not be forgotten.
The demographic point is interesting, it is agreed that how we segment using the tools available to us will be key to our success. To lump all those who have gone beyond their 50th birthday into a single pot would be to neglect the concerns and priorities of a population as diverse as teenager to pensioner. Perhaps a couple of priorities would be universal but if we as a financial services industry, and the key here is services, are to look after these people in the best way we need to be smarter than that. As a group we acknowledge this and the challenges it brings, the use of data science and having a more engaging, bespoke suite of solutions will be intrinsic to success.
Once targeted the group felt that how the education piece was delivered and to what centres of influence surrounding the individual would be key. Where people look for advice is an area that may for worth focussing some effort upon. Does the education piece start with the younger generation, promoting the value of long term positive outcomes to the children of our target markets may result in greater engagement. The when/how of this was hotly debated with anecdotal examples and provides an example of how a very diverse multi-channel approach may be of value
Whilst the group consensus was that advice would lead to the best outcome for consumers how this is delivered en masse for a figure that is viable and valuable for the consumer remains an industry challenge. Whilst good progress has been made by the likes of Just Retirement and LV take up remains a constant challenge. With this in the forefront of the delegate’s minds the question of what is an acceptable outcome was raised. Whilst no answer to this perennial question was reached it is clear that the development of government guidance services is welcomed and an understanding of where they leave people, and therefore where industry can pick them up, offers opportunity.
Product solutions and how they are evolving, in both their popularity and features is an area of which we need to be cognisant. There are cultural and financial influencers at play that have resulted in a movement away from traditional line in sand retirement and subsequent switch from accumulation to deccumulation. With this comes a need for products to evolve or a more varied suite deployed to meet customer need. Underlying priorities remain, the bills covered but flexibility to dip in as required, the way we service this is new and challenging.
Advice models of traditional IFAs seem to have shown a significant shift towards drawdown contrary to what was deemed to be good advice prior to freedoms. The growth of technological solutions that provide seamless solutions to combine the flexibility and guarantees desired will be welcomed.
It was agreed that those with significant retirement savings benefited from easy access to advice and the associated outcome benefits. However the regulator has a focus, rightly, on vulnerable clients and their treatment. Those that fall into the widely publicised advice “gap” could be thought of within the vulnerable population so we can add regulatory to commercial and ethical pressures
Conclusions
The market is striving to respond to the new world we face post pension freedoms. There is some great work going on to develop propositions that will serve a greater spread of the population but the challenge of engagement remains. Partner relationships offer the chance to catch those who may full through the net. What we must do as an industry is ensure that we are working to understand and deliver against real needs to a population that are well informed.
