TIPs have enjoyed steady growth in recent years. However, the inclusion of guarantees looks set to increase their popularity further says Paul Shallis
Who is the target customer for TIPs? Do you see this changing as the product develops? i.e. guarantees come at a cost.
Trustee investment plans (TIPs) developed as a product aimed at providing access to insurance company products and funds to the corporate market and pension trustees. However, more recently, they are increasingly being used as core investments within SIPPs, bringing them firmly into the retail market. They are also now providing a means to bring innovative insurance-based investment concepts into the pensions market.
MetLife's TIP which is available through a SIPP was launched in January 2007 and is open to customers making a minimum investment of £50,000. In general, though, the majority of clients taking out a MetLife TIP have at least £100,000 to invest, often much more.
Guarantees do come at a price but for our customers it is a price worth paying as they are guaranteed through our secure retirement option always to receive back at least the amount they have invested, as well as giving them the opportunity to increase this guaranteed return by locking in investment gains made over time.
What are the key benefits of TIPs?
With the MetLife TIP it is, of course, the secure retirement option, the guaranteed benefit that we offer. However, looking more generally about the TIP market, one of the key benefits can be access to specific investment opportunities that might not otherwise be available to the investor.
TIPs can offer a wide range of charging structures to suit the customer's circumstances and can offer flexible remuneration arrangements for the adviser. Investors can switch between funds within a TIP very easily and often at no additional charge as their circumstances change.
What are the main challenges faced by TIP providers in developing new products and how can they be met?
As with any investment product, providers of trustee investment plans have to excel in a number of areas including offering high levels of customer service and maintaining a strong investment proposition. The relative simplicity of a TIP takes away many of the issues associated with more complex products, but these key building blocks are fundamental.
What effect will the use of guarantees have on the TIP market?
We believe that the development of a new style of investment guarantee will play a major role in developing not just the TIP market but also the markets for other pension and non-pension investment vehicles. There are an increasing number of providers looking at this area - not just those bringing experiences gained in overseas markets, but also some of the more traditional names in the UK market.
Increased competition is to be welcomed by both consumers and advisers, as is product innovation. The UK pensions market - and the TIP market in particular - can only benefit.
Guarantees offer investors certainty and security. Knowing that you will get back at least the money you have invested and can lock in gains helps savers invest with a degree of comfort which has not been the case in the past.
What role does the TIP have in retirement planning?
It's worth going back to basics and focusing on what a TIP does. Essentially a TIP provides an investment vehicle that can be held within a SIPP or other form of pension scheme offering investment options and, in some cases, insurance-based investment concepts such as the MetLife secure retirement option.
This means that TIPs can provide flexibility to advisers and their clients in planning for retirement.
Up until now TIPs have shown steady but not spectacular growth - is this likely to change any time soon?
We have been very pleased by the reception that the MetLife TIP has received from IFAs and their clients. We believe that the likely further momentum behind TIPS being used as investment vehicles within SIPPs, whether used to access specific investment opportunities, guarantees or both will provide a further boost to the market.
Estimates vary but there were around 9,000 TIPS written in the first nine months of 2005, according to the Association of British Insurers, and it is likely sales will continue to set and break records.
For MetLife, the success of the TIP market is bound up with the success of the SIPP market - and this is an area where we back the consensus view that the market will continue to grow.
What factors have prevented the TIP market from growing more rapidly?
Historically, the TIP market has been small and very specialised - in no way a mainstream product or a mainstream market. However, as more and more TIPS are purchased to be held within SIPPs, the outlook is starting to look very different.
ABOUT THE AUTHOR
Paul Shallis is chief operating officer of MetLife Europe.
Paul joined MetLife at the start of 2006 and has been instrumental in developing the new operation. In this role, he is responsible for operations, marketing, product management, IT and compliance within the UK business.
Prior to joining MetLife, Paul was head of life & pensions at AIG Life and, before this, occupied a number of roles at Legal & General including head of product portfolio management and marketing director (retirement).
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