Each month, we ask our industry to answer one big question!
Nick Bladen is head of marketing development at Skandia
The prospect of changing regulation and fluctuating stock markets has had a significant effect on financial services in 2008. With so much change, it is time that the industry views retirement planning and investment planning in the same light, employing robust and defined processes that match risk appetite to asset allocation. This will take advisers closer to achieving a holistic approach and supports a move away from traditional products towards the use of tax wrappers.
In 2008, there has been a shift away from stand-alone product sales towards a more tailored approach, and this should continue in 2009. Consumers are increasingly looking for financial advice that can adapt with their lifestyle and will aim to meet their long-term financial goals. While retirement planning will remain an essential area in which to provide advice, the consideration of retirement needs with other areas of financial planning should become more commonplace, to satisfy the broader requirements of the consumer and achieve the consumer outcomes the FSA are driving for.
Peter Carter is head of product marketing at Met Life UK
It has been quite a year, and it is easy to sink into gloom when facing up to 2009. However, there are genuine reasons to be cheerful. Consultants Watson Wyatt have showed that the at-retirement market has trebled in the last 15 years to be worth more than £13.6 billion and they estimate that it will more than double to £35 billion by 2013.
Providers such as MetLife must continue to innovate to meet the demands of clients. The opportunities are enormous. We launched Retirement Portfolio in 2008, offering capital and income guarantees for the first time, and we promise there's more to come next year.
We want to work with advisers, and urge them to further enhance their skills in retirement income, which will be the area where they will earn most of their money in the next five to 10 years. Regulators need to ensure regulatory standards are improved so that public confidence in the advice system is enhanced, and the latest Retail Distribution Review paper has sought to address this issue.
Perhaps the Government could simplify the rules on decumulation, with a particular focus around age 75. The at-retirement market is booming, and this is one fly in the ointment that we don't need.
Rob Childs is head of operations at DSTiPAS
Against an unsettling economic backdrop and government initiatives to encourage spending, it will be difficult not to give mixed messages, as both spending and saving compete. However, the major challenge in 2009, as in previous years, will be to educate and encourage individuals on what retirement will mean for them. Such a resolution would be focused on how to get this message across, whether it be through the workplace, financial advisers, or direct-to-consumer initiatives - and the key will be simple and clear tools tailored to individual's circumstances.
Andrew Gadd is head of research at The Lighthouse Group
The problem with New Year's resolutions is that over 80% of them are broken by the end of January. Assuming that these are intended to be kept, then I think the Government needs to keep savings as simple as possible. The problem is that with personal accounts, auto-enrolment and new savings schemes such as the Savings Gateway scheme, there isn't a single message on the best way for the public to ensure they save. Can the Government please just try to keep it simple?
Nigel Hare-Scott is sales director at Home & Capital Advisers
Home & Capital would like the retirement planning industry to put pressure on the government to prevent an imminent crisis facing those approaching retirement. With low interest rates having an adverse effect upon saving returns, and the drastic fall in the value of most investments, many pensioners will find their retirement income is woefully inadequate. This situation will be made worse for those who carry debts into retirement.
Despite the reduction in house prices during 2008, residential property remains most people's principal source of wealth. Equity release should now be given an emphatic endorsement by the Government as a safe means of bolstering pension incomes. This endorsement should be supported by a significant relaxation of the benefit rules, to minimise the potential effect of equity release upon means-tested benefits.
At the same time as sanctioning the use of equity release for retirement planning, the Government could also be urged to remove the requirement for an annuity to be purchased at the age of 75, regardless of the state of investment and annuity markets at the time.
Dave Harris is managing director sales & marketing at Living Time
Too many people reaching retirement are being funnelled almost by default into lifetime annuities without considering or even being aware of alternatives. We would like 2009 to be the year that the industry gets serious about offering true consumer choice, allowing every retiree to weigh up the options and make informed decisions.
The industry's New Year resolution should be to promote choice at retirement - to offer more options, instead of merely reinforcing the domination of lifetime annuities through the dysfunctional Open Market Option. Next year, will see a huge focus on accumulation, as plans are finalised for the introduction of personal accounts, but there needs to be an equal focus on decumulation. There is little point forcing people into a pension, only for them to make poor choices when they retire. Free advice in the workplace, perhaps supported through tax breaks, would be a huge step forward. But most importantly, attitudes need to change so that retirees feel able only to buy their lifetime annuity at the time that best suits them, rather than the time that is most convenient for the industry.
Jonathan Howard is head of corporate clients at Courtiers
The New Years' resolution for the retirement planning industry should be to attempt to restore public confidence in UK pensions. Runaway equity prices, coupled with a drive for the industry to put its house in order following the mis-selling scandals of the late 1980s, had been doing a great job of rebuilding public faith in a sector plagued by negative press over the decades. Unfortunately, the recent market turmoil will have undone some of this progress, as a sceptical (but vocal) minority chooses to view declining fund values as proof that the product itself is fundamentally flawed. The industry could be in for a rough ride if personal accounts are delivered on time in 2012 - people build up a healthy cynicism towards new government initiatives when times are good, but with private and company pension values declining, PAs might start to look like an attractive alternative. The industry must reassert the tax advantages and investment opportunities offered by pensions, as well as the value of good advice. Furthermore, RDR will force the industry to work towards a new level of professionalism by 2012, which should give the public the extra shot of confidence it needs.
Jon King is managing director at Hodge Lifetime
As we approach the end of the year, future and what the New Year will hold for them and their companies. Of course, this is done in the light of what has passed over the previous 12 months.
It is clear that the last year has changed the world of financial services - who could have imagined the difficulties that some high street names have encountered?
The effect on the buying habits of clients is yet to unfold completely, however, one thing is now very clear - a big name is no longer the guarantee it once was, and truly independent advice has never been of more value to clients. This should be at the centre of any business planning that IFAs are currently undertaking.
Nick Leitch is head of investment marketing at Scottish Life
We are in the midst of the worst economic crisis for decades. With massive market volatility, there has never been a greater need for advisers to deliver a professional investment service to their clients, helping to guide them through these troubling times.
One particular issue is to identify the right approach to selecting investments that align with the individual's personal needs and circumstances. This advice must be founded on a process with a solid basis, rather than ad hoc stock-picking or selecting 'flavour of the month' funds. Put simply, there's far more to be gained from correct asset allocation than in trying to pick "prize winning" funds.
The challenge which advisers face is that delivering a solid, investment governance process to their pension clients can be both time-consuming and costly.
Yet advisers, with the help of providers, must meet this challenge head on. It is now more important than ever that we work towards delivering strong investment governance to customers, and re-affirm the valuable role that pension savings plays. This would certainly be a resolution well worth keeping.
David Loudon is head of onshore offices at Citi Quilter
There should be an industry-wide effort to emphasise the importance to individuals of planning for their future. It is unlikely that anyone will have escaped the torrent of gloomy economic data which has prevailed during the last six months and the pessimism which is dragging everyone into 2009. There will be those who have used their best endeavours to prepare themselves and their families for the future - perhaps some years ago or perhaps more recently - and that preparation is likely to be of benefit in these troubled times.
The retirement industry should seize the moment and encourage those of working age, particularly the younger sections of society, to take advice and act, so that increasing numbers of the population are prepared for their future. The 'spend now' culture has proved a disaster for many, and however difficult the task may seem, there is a duty for industry professionals to take a lead and use their best endeavours to spread such a message widely.
John Moret is sales and marketing director at Suffolk Life
I would like to see the FSA make a New Year's resolution to tackle a couple of areas where regulatory change would make a big difference. Firstly, there are the complexities of the existing pensions tax regime for those moving from savings into the drawing of benefits. The inconsistent treatment of death benefits, the artificial divide caused by the retention of the age-75 limit and the unnecessary complications brought about by artificially imposed income regimes threaten to limit product innovation and introduce unnecessary cost and risk to what is fast becoming the most important part of the pensions market. It is time for a radical reform to allow advisers and investors to concentrate on the key issues of longevity and investment risk rather than focusing on artificial tax barriers.
I also believe it is time that the FSA consider whether the regulatory regime for SIPPs is appropriate. As demand increases, it is important that we have a regulatory regime which reflects the differences between the traditional bespoke SIPP and the packaged products that are dressed up as SIPPs - and one which more accurately reflects the risks associated with the different propositions.
Mike Morrison is pension strategy manager at Axa/Winterthur Wealth Management
We have all seen the facts and figures regarding the number of 'babyboomers' retiring in the next few years: what I would like to see in the New Year is a full review of the options available on retirement - looking at what consumers need and considering the real issues at all levels of income.
This could involve a consideration of the options available in other countries, and how successful or otherwise these have been, more annuity innovation, a review of the drawdown options at age 75, and even a consideration of how long-term care could be factored into the equation.
After a year spent on the Pensions Act, it would be a pity to squander all the pensions knowledge that politicians now have.
Ian Naismith is head of pensions market development at Scottish Widows
With reforms to state and private pensions now largely established, attention has turned to what happens when people move from saving to drawing benefits. A lot has been done to improve processes, but there has also been good thinking on possible legislative changes by the Association of British Insurers, the Pensions Policy Institute and others. It would be really good in 2009 if the industry and politicians could agree sensible changes to the rules on drawing benefits, particularly after age 75, as the current position is a mess. This would not only help those in, or approaching, retirement, but would also encourage others to save in the knowledge that pensions offer a flexible and tax-efficient way of providing for their old age.
Vanessa Owen is head of equity release at LV=
We have started to witness a change in the perception of equity release throughout 2008, which is great news for the industry. Product providers, the industry trade body SHIP, and specialist advisory firms have been working hard to improve the image of equity release and at last, efforts are starting to pay off.
We know that pre-retirees are concerned about their financial situation in retirement. Just one in ten (10%) people approaching retirement who have sought financial advice have discussed equity release, yet it could prove a real, appropriate solution for many.
This New Year, I would like to see more advisers consider equity release as an integral component of the retirement planning process. Advisers should consider whether equity release is appropriate for a consumer. If they do not advise in this area, they should refer clients to a specialist advisory service. It is imperative that consumers have access to specialist financial advice.
Bob Perkins is technical manager at Origen
The problem with New Year resolutions is that, despite the good intentions, they invariably get broken.
There are undeniable challenges for the industry, not the least of which is to get people refocused on long-term retirement planning. The British public's love affair with property looks like it will continue to cool. With predictions of the 'peak to trough' fall ranging from 25% to 50%, those investors who have over-committed themselves may now regret it.
In some cases, it would be tempting to adopt a smug "I told you so" attitude, but the combination of the end of the property boom and low stock market values provides a significant opportunity to get people back to focusing on the principles of portfolio construction.
Personal accounts are not that far off now and there is plenty of planning to do to ensure that employers understand the implications and that employees get the best value for money from the pension contributions. The latter can be best demonstrated with salary sacrifice, an opportunity boosted from 2011/2012 by the proposed 0.5% increase in rates.
There is still considerable scope for guiding clients through retirement strategies and the continued development of flexible products would be welcome. If this leads to some further commonality between providers' offerings, then that too would be constructive.
On a final note, the freezing of the Lifetime Allowance announced in the Pre Budget Report means that there may be work yet to be done in the first quarter to review transitional protection for certain clients. This would be those who may have been hoping that future RPI increases in the Lifetime Allowance would keep them out of the Recovery Charge - they have until 5th April to take appropriate action.
David Seaton is director of Rowanmoor Pensions
In 2009, the retirement planning advisers should seek to find simple and concise explanations to guide the client through the maze, to ensure that the client gets the maximum benefit from his pension with agreed and understood levels of risk compatible with limited liability to tax.
Pension Simplification has created an array of complexities for those seeking to take their pension benefits. Even the traditional annuity purchase can be an extremely difficult area, while for many, the prospect of an unsecured pension and the risks of continued investment, particularly in the current difficult investment climate, is not attractive.
Those clients with larger funds who are approaching age 75 and who do not wish to buy an annuity face the complexities of either alternatively secured pensions (ASP) or scheme pensions. With ASP, the client must accept the probability of a falling income while maintaining a fund, and after providing a dependant's pension, leave 82% of it on death to the taxman. The scheme pension requires actuarial input to advise on the level of pension, but can provide a ten-year guarantee, to ensure maximum use of the fund and diminish it so that there is as little left for the taxman as possible.
However, for those who enjoy greater longevity, there is a significant chance of the scheme pension dropping in later years.
Mary Stewart is marketing director at Hornbuckle Mitchell
As we head into more austere times, people need to make the best of what is available to them. In the pensions world, this translates to making sure that clients are well informed of the opportunities to help them negotiate troubled times. The industry's New Year resolution should be to remind itself that each client is an individual in a unique situation that demands personalised solutions.
Arguably, people need more help in downturns than in good times, which increases the opportunities open to those advisers who have the knowledge and experience to ensure that their clients are well positioned when the economy picks up. Cash holdings are being invested, and we already see many advisers rising to the challenge, for example, using SSASs to lend money to their businesses at low rates, using SIPPs to buy their own premises to release funds back for business investment or for simply shifting depressed share portfolios into pensions to provide a tax relief fillip and tax-efficient future growth. Most of the solutions are already in place, so it is up to us to make sure that clients are aware of the possibilities.
Martin Tilley is pension consultant and business development manager at Dentons Pension Management
My suggestion with this would be for the Government on the subject of pensions. Don't meddle in things you don't understand!
Andrew Tully is senior pensions policy manager at Standard Life
I hope that the Government allows employers who offer contract-based pension schemes the option of auto-enrolling employees well in advance of 2012. It is clear that auto-enrolment improves take-up, so why should we miss an opportunity to increase voluntary pension provision now? Allowing employers to do this on an 'opt-in' basis gives choice, but it also means that thousands of workers could start saving three years earlier, which is surely consistent with the Government's intentions.
From the regulators, we need the FSA to provide details of how the RDR will apply to corporate pensions. If the FSA leaves corporate pensions outside its remuneration requirements, it could cause huge distortions in the pension market.
Advisers will wish for less volatility in the markets, although this environment, coupled with the tax changes announced in the budget, gives a clear opportunity to show clients the need for, and usefulness of, professional financial advice.
Providers will hope that the Government can find a way of ensuring the forthcoming personal accounts scheme has minimal impact on existing pension schemes. Encouraging more people to save is a laudable aim, but it should not be at the detriment of existing savers.
Julian Webb is executive director of DC business development at Fidelity International
2009 has to be the year of communications. Most DC members rely on their annual statement to check the value of their pension pot when they land on doorsteps. In 2009, it is up to providers, advisers and employers to ensure the expectations of millions are managed and reactions are sensible. If this finally kick-starts greater commitment to regular member communications so much the better.
Corporate pension default funds simply have to change - passive global equity funds are becoming the new legacy products and more schemes are already embracing diversification. I expect this to continue because a more diversified default fund, especially if managed in a target date approach, can provide a smoother path to retirement with less volatility than equities. I hope the appeal of this approach, after so much volatility, will be more self-evident.
We need to see companies making early decisions on personal accounts. In 2009, I can see better DC schemes getting better, and companies with less commitment to DC just waiting until they have to adopt personal accounts. As we move towards auto-enrolment, early movers will face less costs, less upheaval and less member confusion, and advisers can play a crucial role in this.
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