As we prepare to say goodbye to 2008 Helen Morrissey asks what lessons have been learned and what can we expect from 2009?
Look back at 2008 and you'll see a year where the retirement industry continued to grow, SIPPs continued their meteoric rise and the Retail Distribution Review ushered in fundamental changes to advisers' business models.
However, overshadowing all of this are the tumultuous investment markets that have seen the size of peoples' pensions pots diminish, forcing them to rethink their retirement plans. So as we look towards 2009 what can we expect for the retirement planning industry?
"The main thing to come out of the events of the past year is that things we took as certainties have now been proven to be incorrect," said Nigel Hare Scott, managing director of Home & Capital Advisers. "Going forward advisers and their clients will need to trust their own judgement and carefully weigh up the options open to them before making any decisions."
However, in a year where investment markets have varied dramatically and we've seen the collapse, or near collapse of many respected companies, how willing are clients to invest their money now? Are erratic markets leading people to stuff their hard earned savings under the mattress or even worse not save at all? According to Nigel Spiers, chief executive of Buckles Investments, advisers will have a huge task in coaxing clients back into the market during 2009.
"I think one of the main things to come out of this past year is that advisers will now have a greater realisation of what risk really means and as a result they will take less risk with their clients' money- particularly in the run up to retirement," he said. "However, building clients' confidence is going to be a huge undertaking for advisers over the coming year - particularly when it comes to assessing provider strength. We have a real air of suspicion as clients want to know that their money is safe."
This is particularly true of the burgeoning SIPP market. According to Ray Chinn, head of pensions at LV=. SIPPs are often invested in more esoteric assets which would need to be handled with even more care going forward. As a result he believes that there will be an increased move towards specialisation within the market.
"We are painfully aware that people have been caught out by what's happened and there is a need for advisers to acknowledge where their expertise lies going forward," he said. "As a result we are seeing a growth in advisers looking into using discretionary management services and working with risk rated funds - all of these things are good for the industry as far as I am concerned."
While times are undoubtedly hard for clients, advisers will also be facing a whole new set of challenges. As the mortgage and investment markets continue to struggle advisers will need to look at other areas to move into.
"The first point I would like to make is that it's pretty obvious that adviser business models need to be reviewed on a fairly fundamental level going forward," said Nigel Callaghan, pensions analyst at Hargreaves Lansdown. "The days of brokerages relying on initial commission are over and if they don't realise this then they will be facing tough times ahead. The mortgage market has all but disappeared and people are wary of entering the investment markets. New inflows of money into the markets are slowing up and brokers need to look at other areas to increase their revenue stream."
So while advisers get to grips with these challenging markets they will also need to get to grips with the rapidly evolving retirement market.
"On the retirement side of things we are likely to see an increasing move away from traditional pension products towards more SIPP-like products," said Callaghan. "This is especially the case since investors have been able to invest protected rights money in SIPPs. I think the annuity market will continue to grow apace and it will become an increasingly crowded area for both providers and distributors as more people look to move into the retirement business. We are also seeing the annuity business fragment rapidly with the growth of the enhanced annuity market and I would expect that to be a continuing feature throughout 2009."
So while the annuity market looks set to grow over the coming year what about the future for income drawdown? Has the drop in investment markets discouraged investors from getting involved in the markets? This is a point where experts remain divided.
"I think drawdown may cause a few problems in 2009 as we face the very real prospect that people will start to run out of money," said Spiers. "Many people have been taking maximum withdrawals from their fund over the past few years but now the investment markets have fallen that is an extra hit to their fund."
However, according to Chinn this shouldn't pose too much of a problem going forward as most drawdown investors are financially sophisticated and would not be taking the maximum withdrawals from their funds.
"Our experience of the drawdown investor is that they've actually only been taking minimal withdrawals from their fund so while its value will have been hit they haven't actually depleted it too much. I think it's all about how these funds are being managed."
It looks likely that the coming year will also be an important one for the variable annuity market as people increasingly look for guarantees for their retirement income.
"I think that there will be real opportunities for variable annuities going forward and people will continue to be interested in them," said Chinn. "However, advisers will need to see what is underpinning the guarantees - there's a real need for proper due diligence."
However, while there continues to be interest in these products the current costs associated with them will continue to hamper their progress.
"Guarantees and variable annuities will both continue to develop but the cost really needs to come down," said Spiers. "We need to see AMCs of 2% or below for the market to really develop."
So while the retirement market will continue to evolve what does the future hold for the equity release market?
In the past it has suffered something of a poor reputation and has been seen as a product of last resort. However, regulation in the industry has done much to improve its reputation and years of rapid house price growth means that people have plenty of equity in their homes that they could release to help fund their retirement.
However, how have the house price falls of the last year affected the way people view equity release?
"At the moment people are reading media reports of falling house prices and are wondering whether they should wait a while longer before doing an equity release and this is putting people off," said Hare-Scott. "However, for many people their home remains their biggest asset so we need to get the point across that equity release remains a valid retirement planning tool."
However, he believes that brighter times for the equity release market are just around the corner.
"What we actually need is a more stable housing market going forward if we are going to kick start the equity release market," he said. "Hopefully that is what we should get when we finally emerge from this crisis. If this happens then I genuinely think that 2009 will be a really positive year for the equity release market."
The financial services industry has had to learn many hard lessons over the past year and there may well be more to come in the coming months. The retirement industry has been by no means sheltered by this and it will be a wiser more measured industry that will emerge over the coming year.
"I think the days in which people ended up with just one retirement product are coming to an end," said Callaghan. "More people will look to deploy a suite of products to meet their needs - maybe mixing drawdown and annuities for instance. This is all part of the holistic approach that many advisers are looking to adopt. I think the result will be a much more efficient retirement market as the way retirement products are sold will change as advisers increasingly look to provide clients with products that closely meet their needs."
Less environment, more governance threatens to undermine firms' green credentials
Evidence your compliance
Quarter of single pensioners dependent on state