Helen Morrissey speaks to Canada Life's newly appointed technical support manager Nigel Orange, about his first few months in the role and asks what he sees as the main challenges facing the retirement industry.
Tell me about your role? What are your key responsibilities?
My role is varied and includes supporting our sales teams with any technical issues that may arise.
I also work closely with the IFA market and carry out training to help them get to grips with any pension products or issues. I also have to ensure that any product documentation we issue is accurate and easy to understand and I also get involved with the development of enhancements to our products. I work with two other technical support managers who specialise in estate planning and investments. The rest of our team is made up of product managers.
What do you see as your key challenge going forward?
I think the main thing I need to get to grips with is raising our pension profile. Canada Life is seen to be very strong in the post retirement market but not so much in the accumulation market. There is a void here that needs to be filled and we are looking at this.
At the moment all I can say is that the intention is to have something in place by the end of the year. We need to provide a consistent retirement proposition for our customers and to do this we need to have both an accumulation and decumulation product.
My other key priority is to continue to highlight our trustee investment plan. We upgraded this product last year and it has been a real success so far.
How are you seeing people's retirement patterns change?
All the evidence I've seen points to the fact that people are looking to phase into their retirement much more rather than make it a one-off event.
We've seen poor stock market returns and the closure of final salary schemes over the past few years. We've also seen people choosing to use property as a way to save for their retirement.
Obviously all of these things have brought their challenges and the situation has not been helped by the banking crisis. Added to this, people are living longer and annuity rates are low. If you then go on to look at what people expect from their retirement, you can see that aspirations are not keeping pace with reality. As a result people are realising that they are going to have to work longer if they are to achieve the lifestyle they want and so they need more flexibility from their retirement planning strategies. We are seeing more people looking to take part of their benefits while continuing to work and it's fair to say that employers are going to have to become much more flexible in terms of enabling people to work longer. We should also expect to see greater innovation in product design.
Where do you see this innovation occurring?
One of the biggest issues people face coming up to retirement is that they have to annuitise at some point.
However, many people do not want to go down this route and I do think this is an issue that the government will need to address. Of course provisions need to be made to ensure people do not squander all their savings and have to rely on the state but, again we need to enable people to have more access to advice in the run up to retirement so that this does not happen.
Annuities do come in for their fair share of criticism but the fact remains they will be an important part of the retirement market. We are seeing a move towards more detailed underwriting which will enable more tailor-made annuities to be developed. How do you see this part of the market developing?
The biggest issue clients have with annuities is that they don't see them as providing value for money. To an extent tailor-made annuities solve this problem as they are made according to that client's specific circumstances.
At the moment we use factors such as postcode, occupation and certain conditions such as strokes etc but, how much more detailed can this underwriting become? Will we get to a point where family medical history is included? There is certainly a move to more detailed underwriting of annuities and it will be interesting to see how it evolves.
What place do you think variable annuities will occupy in the UK retirement space in the future?
This is an issue that has been much debated and as far as I'm concerned, there has to be a future for them. They have been very successful elsewhere and I think they can be in the UK as well. The variable annuity concept fits in well between annuities and income drawdown.
However, if they are to differentiate themselves then they need to provide their clients with certainty. At the moment these products are not well understood and they are not sufficiently well embedded in the IFA market. The fact that the products are all so different makes it difficult for the adviser to compare and so they become difficult to recommend. People are very willing to pay for something if they see the value in it but, at the moment it is difficult to measure the value in these products.
Nevertheless, I do think that given time, advisers will get to grips with variable annuities and they will be a viable proposition in the long term.
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