As a specialist annuity provider, Just Retirement has had a turbulent time since George Osborne decided to thrown a “hand grenade” at the pensions industry, as Steve Martell, the group’s Director – Development, Intermediary Sales describes it.
Yet with hindsight, Martell believes the freedom of choice now offered to the at-retirement market has done the provider a favour in simply accelerating its growth and product development plans, yet he concedes it’s shock factor.
“Ironically it has probably helped our product development capability because it has just accelerated the plans we already had underway, but we perhaps may not have wanted it quite so quickly.”
Martell believes providers will tend towards a blended product offering, but is confident that secure income providers expanding into the drawdown space will be a far easier challenge than the reverse situation.
“We think we can play in that market. The challenge will be far easier for a secure income provider with their intellectual capital to bolt on a drawdown offering, but how does a provider of drawdown suddenly create the ability to deliver secure income?”
However the real fallout of March’s Budget announcements and the devil of detail, as revealed this month, will take effect from April and potentially six months after that to really show its impact, he says.
While the provider is responding with new product types, for those not fortunate enough to have access to a financial adviser or some form of financial intermediary or guidance, he does liken the newfound pensions freedom to a ‘loaded gun’.
“It’s slightly disturbing if, as we heard recently, that pensions are now comparable to ‘bank accounts’ because that’s like handing someone a loaded gun and putting their finger on the trigger and saying fire it whenever you like. If they have advice then fair enough, but if they don’t…” he warns.
In-depth consumer research carried out by Just Retirement recently suggested four key themes characterised people’s retirement solution needs: accessing their solutions in a ‘one-stop shop’; having at least some degree of secure lifetime income – even for the wealthy; the ability to dip into their savings at some point in the future; and stable, steady investment outcomes.
With this in mind, while the higher value savers may be well looked after by advisers, Martell spies a huge opportunity for the mass market – those with lower pots of £100,000 or less – suggesting some form of “advice factory” may become more commonplace.
“Although no one seems to have worked out how to do that yet,” he says.
Befuddled by the fall in pension savers exercising the open market option – especially given their newfound freedom, Martell says the mandatory pensions passport concept would be welcome.
“The industry needs to break the dominance of the holding providers. Yet so much has happened so quickly, it will require a lot of intervention. We had a business model that was predicated on organic growth and we’ve had a hand grenade thrown in to precisely where our growth will come from.”
While Just Retirement’s strategy looks set to embrace the more flexible landscape, suggesting it is no longer black and white in terms of the types of solutions offered by any one provider, annuities still hold relevance, he insists.
“If you understand the financial consequence of waiting, then that is fine. If you don’t, the common sense approach is that if you definitely need secure income you should take out an annuity because you will only end up buying the same thing in a year’s time anyway, when yields could be even lower.