Green Shoots of Innovation in the Grey World of Retirement

In December 2014 I attended a conference on the future of the Retirements sector. It was only a few months away from the launch of the new pension freedoms legislation and there was a palpable sense of anticipation and excitement at the opportunities the new regulations would enable, and much talk of innovative new products designed to make the most of them.

I attended the same conference a year later, and 9 months following the launch of the new regulations, the mood of the conference felt very different. Instead of far-reaching innovation, it felt like most providers had struggled to make even the most basic tweaks to their existing drawdown products to allow them to comply with the new rules. No one appeared to be actively seeking to combine the best elements of advice, guaranteed income and flexible drawdown in the way that had been so eagerly anticipated a year earlier. There was a real sense of “wait and see” before leaping in to do anything too radical.

Well, I’m pleased to report that, as we approach the mid point of 2016, the long-awaited green shoots of innovation appear to be finally starting to poke through.

2016 has seen some providers launch blended accounts that seek to combine elements of guaranteed annuity, flexible (investment based) annuity and drawdown in a single, flexible package. Other providers are rumoured to be looking to emulate (and indeed build on) these concepts.

We are seeing an increased number of vertically integrated financial services companies that combine financial advice, product wrapper provision and investment expertise under a single umbrella organization. Some of these companies are specifically aiming to provide a cost effective solution to help guide customers with modest pensions pots (<£100k) through the complex decisions they need to make as they approach and move through retirement. This is an area that is badly underserved following the fall out from RDR.

There is much talk of robo-advice (see our excellent blog on the subject). Whilst this technology has a long way to go before it can even scratch the surface of the complexities of turning a pension pot into an appropriate source of retirement income, progress is accelerating and automated advice will certainly play a role in the future in helping many people plan for their retirement.

Add to all of that the potentially increasing role of equity release, a secondary market for annuities and the integration of long term care into retirement planning and this space suddenly starts to look downright exciting!

The world of retirements is changing very rapidly, and fortunately the financial services world finally seems to be trying to change with it.