How can you help your employees get. pension world? Andrew Pennie May 2015

Transcription

1 How can you help your employees get the best retirement outcome in the new pension world? Andrew Pennie May 2015

2 Pension freedoms.. Come with...

3 Pension decumulation.. Decumulation vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv

4 The Decumulation Process..

5 What is wrong with current system? Annuities don t provide freedom to meet changing retirement patterns Annuities perceived as poor value Not whether but when! Pre-retirement strategies are misaligned 80-90% in default funds Default funds predicated on annuity purchase BUT only 40% forecast to buy an annuity

6 Default strategies no longer appropriate? p SUITABILITY? Annuities Cash-Out Flexi-Access Members likely to adopt flexi-access drawdown will be heading in the wrong direction i in the years leading to retirement

7 Cash & Gilts Don t Match Long Term Investment Needs of Drawdown

8 Why don t defaults work for flexi-access drawdown? Everybody s retirement will be different Different needs, objectives, circumstances and risk tolerances Everybody s profile of pension benefits will be different Different needs for cash and income throughout retirement By definition, therefore, everybody s investment strategy for flexi-access drawdown should be different. Default drawdown strategies can give rise to a mismatch of assets Could result in risk and financial loss But default options needed for those who will not engage.

9 Bespoke decumulation process.. Target for tax free cash (growth and contributions) Transition to drawdown plan mirror strategy Transition to annuities in later years

10 Every member s needs and risk profile will be different

11 Every member s needs and risk profile will be different

12 Every member s needs and risk profile will be different

13 Every member s needs and risk profile will be different

14 Employees need more support pre-retirement.

15 Pre-retirement decisions for your employees Which retirement income strategy is right for me? Annuity? Drawdown? Annuity Drawdown? Cash-out? How should I invest to best achieve my goals? De-risk? ik? Maintain risk? Increase risk?

16 You don t know what you don t know.. There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know. Donald Rumsfeld

17 You don t know what you don t know. Pension fund Age Retirement t date? Marital status? Other pensions Other investments t Debt Dependants Objectives and plans Priorities Attitude to investment risk Health All these factors will influence the correct retirement strategy..

18 Wake up ppacks are not working.. In absence of detailed information wake-up packs must cover all possible options Over-information Confusion o Lack of engagement

19 Guidance guarantee will be too late for some Delivered 6 months before retirement too late to support pre-retirement decisions Guidance only and therefore similar problems to wake up packs. Main benefits: Help people understand benefits of shopping around Help people understand implications of cashing-out

20 A more personalised approach is needed.. Which retirement solution is right for me? How validate my decision? How do I pick the right investments? Am I on the right pathway? Where annuity (or cash out) validated, existing default strategies are relatively effective Where flexi-access drawdown is validated, personalised investment strategy needed

21 Helping your employees Provide advice pre retirement Facilitate tailored investment strategies Provide advice at retirement Facilitate transition to drawdown/annuity d Review default funds Provide education/support pre and at retirement Communicate changes Refer to Pension Wise

22 How to achieve the best for your employees Tackle the advice gap in the pre-retirement years Different means of engaging and educating e.g. online tools More personalised approach Advice? As trustees/employers, regulated advice has huge advantages and reassurances Identify those who need an alternative to the default option(s) This will likely be a minority Tailored strategy needed for best outcomes Sensible and consistent transition to post-retirement planning

23 How much? Advice can be expensive Group exercises cheaper but less beneficial than 1:1 advice 150 HMRC allowance for pension advice No P11D benefit and still a business expense Focused advice solutions available at this price point Facilitate rather than pay? A salary sacrifice benefit?

24 Helping members to make decisions.. Our Annuity or Not tool involves 5 simple steps giving a RED, AMBER or GREEN result GREEN means an annuity is still likely to be suitable and a free report is available

25 Helping Members To Make Decisions Our Annuity or Not tool involves 5 simple steps giving a RED, AMBER or GREEN result For AMBER or RED outputs members are invited to book a free online consultation

26 Online analysis helping members look ahead With live interactive analysis including what if options and risk assessment

27 Online analysis helping members look ahead With live interactive analysis including what if options and risk assessment

28 Summary Pension decumulation is a process and never a one-off event Pre, at and post retirement Default strategies don t work for flexi-access drawdown Wanting to use drawdown versus being able to do drawdown are not the same thing feasibility? Everybody s retirement will be different A more personalised approach is needed to achieve best outcomes Guidance alone is insufficient Help is available and at a variety of price points Time for action