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The latest budget will for sure give all the Finance, Risk and Actuarial people nightmares. All the assumptions about longevity risk, cross subsidies, future roll over straight to profit. I imagine lots of pizza and beer nights ahead. A sure sign of trouble in many large offices. However, for marketing the opportunities are huge. My predictions for the future
1. Individually underwritten annuities
The competition in terms of solutions now will be vast. Enhanced annuity can deliver greater income, and provide level of certainty that many will find attractive. Expect to see this as the norm. It should have already been. You can’t get life cover at 20 without medical questionaires, yet you can buy an insurance product at 65 without so much as a “are you overweight”.
2. Rates for Annuities will improve
This is a risky one, as if less go into the annuity pot and more become underwritten there may well be less fat (or margin). However, in the long term my bet is actuaries will be advised to review their assumptions and take on a bit more risk. The competition for annuities is no longer with other annuity providers, which to a large extent could be controlled, but with other more flexible solutions.
3. Unitised Annuity
At best a niche product today, you will see much more interest in this type of solution, leading onto the next “big play”
4. Third-way products
Hailed as the new way pre 2008 these have really failed to get off the ground, largely due to the cost of the guarantees. However, if less annuity risk is being taken, then that spare capital from all the solvency II requirements will have to be used up somewhere. Expect some innovation and decent pricing coming for this area
5. Packaged Investment Solutions
Growing in popularity in the accumulation phase I see this as a huge area. Never really understood why Fund Managers not already doing this – but real incentive to do this now.
6. Non-Advised brokers – changing names and wording quickly
I think the biggest announcement was the one around all people at retirement will get access to face to face impartial guidance. Expect to see lots of pages of content re-written with impartial guidance in it.
7. Holistic Customer Centric Solutions for those in the Retirement space
One especially for Phil here. But there will be lots of blue sky thinking around how to join up all the solutions. There will be a need to help customers who opt for the guidance and not advice route. It could be great, or it could be old thinking. Whatever, expect shares in 3M to rise as the use of post-its in brainstorming sessions boom.
8. Face to face impartial guidance changed to guidance
One year and £20m later and we will end up with it being ok to have some form of conversation about the risks you will face if you take a certain route. Ton of people don’t want or merit a face to face conversation, those that do will be able to access it easier. It will introduce new risk of bias and mis-selling of the solutions from number 7. I just can’t see the adviser community having the capacity or desire to have all these conversations with people with £25k
9. Spending boom just in time for pre election economic forecast
Not only will tax coffers get a short term boost as more people take their pension assets in a oner. (remember we won’t get that future income) You will also see increased spending as the majority of those in the less than £30,000 pots will spend a chunk. This will give the growth forecast a nice turbo boost in time for elections
10. Regret
It’s been mentioned here before, but will we look back at this in 20 years time as a great innovation, or a huge mistake. Will those with poorest pots place more reliance on state as they spend too quickly? And see above point no small annuities, mean no small tax payments coming in. I think we will
Still lots for marketing guys to do in the meantime, and lots of new innovations. I just hope whatever is developed is shaped by some of the people who contribute here. What a think tank that might prove to be.
Would be great to hear what you think.