Bob Bullivant, the former chief executive of Annuity Direct, can afford to have strong opinions about the pensions industry.
He has been in the business for 45 years, and now having helped conduct the sale of the company to Fidelity, he is working three days a week as a director until either he or Fidelity decides to part company.
When he started in pensions, managers wore bowler hats, people addressed each other by their surname and there were very few women in the office.
The industry was transformed in the 1970s and 1980s, and further changes and innovations have led him to hold a jaundiced view of the life offices.
He said: “I think they need to take a good hard long look at themselves. If you go back over the years, without doubt they have always ruined the market through greed.
“They had a really good thing going with low-cost endowment mortgages and with profits. Good sense went out the window in their greed for new business.”
Technology has been one of the main catalysts for change in the pension and life business over the decades. But when Mr Bullivant started, many calculations were worked out in one’s head.
One of the biggest changes has been the decline in the deference culture, when there was “equilibrium” and respect for the client when the company made a mistake. This came with the emergence of a big money-making business with aggressive commissions and sales forces. Some changes, such as the decline of defined benefit schemes, contained the seeds of their own destruction, while others were actively driven by life offices, such as changes to commission structures.
However, the result is that now, people have to take more responsibility for their own affairs, bear more (if not all) of the risk, and need advice more than ever.
The turning point, said Mr Bullivant, was in the 1970s, when Hambro Life Assurance ad others, applied in a more aggressive commission structure to individual pensions to directors and the self-employed, along with higher charges.
Mr Bullivant said: “Suddenly the industry went from equilibrium to a massive drive to commission-based sales, and that ran right the way through the 1970s and 1980s.”
This led to the emergence of the direct salesforce. Mr Bullivant said: “In those days they actually did an awful lot of good, but the problem was that eventually every company wanted a direct salesforce, and there weren’t enough people to go around.”
A lot of companies sprang up over the decades, with the likes of Skandia and Hambro trying to take market share from the big companies and many invested in training. It meant a lot of people had pensions who otherwise might not have done so.
But the insurance companies pushed their luck. Mr Bullivant said: “There just wasn’t enough business to go around for all the companies to be in the market.”
Similarly, life offices got too ambitious with other financial products, seeing too much of a good thing. Endowment mortgages, for example, were initially priced on a very conservative basis, and they were a successful product.
Mr Bullivant, said: “The early policy did repay the mortgage, but they all jumped on the bandwagon and wanted lower and lower premiums, which meant less was going in to fund the mortgage.
“More and more companies joined and that meant the basis [for the premiums] became less conservative and more aggressive.”
Another example of falling rigour was when the mutuals wanted the endowment policy to be lodged with building societies. Mr Bullivant said: “By the time we got to the 1990s, no one wanted the policy assigned to them, so they did not know if the policy was in force or not.”
But as the sector became more aggressive, so its treatment of customers has deteriorated. When Mr Bullivant was starting out, he said: “There was a sense that you treated customers properly. It was much more ‘my word is my bond’.”
He added that if a company misquoted a client the wrong the price, and discovered the mistake, they would stick by it, rather than pass the mistake on to the customer.
Some changes to the pension landscape, however, happened through natural evolution. Defined benefit schemes, once considered to be the gold standard in the UK, have declined dramatically – not just because of the Maxwell pension scandal and resulting legislation, or because of Gordon Brown’s tax raid.
Gradual tinkering with the pension schemes to improve them eventually led to their own demise, as costs kept piling up, making the schemes too expensive for companies to run.
Mr Bullivant said: “Every time something was put right it increased the cost on the employer and eventually it reached the point where the employer said ‘I’m not paying any more.’
“Whether it was preservation or the Pensions Act, Maxwell, solvency requirements or Gordon Brown’s tax raids, they said: ‘We can’t afford it any more, it’s too expensive to provide.’”
As for what the future holds for Mr Bullivant, who in his time has worked for the CII as deputy director general, as well as working for Britannic Retirement Solutions and Target Group, he will be spending some of his spare days helping with the grandchildren – probably has several books up his sleeve.
Melanie Tringham is features editor of Financial Adviser
Mr Bullivant’s career ladder
2008 - present, Annuity Direct, first as chief executive, now as director
2004 - 2008 CII deputy director general
1999 - 2004 Britannic Retirement Solutions, corporate development director
1991 - 1999 Helm Financial Services, managing director
1977 - 1991 Target Group, sales and marketing director
1973 - 1977 Leslie & Godwin (Midlands), Assistant Life Manager
1968 - 1973 Guardian Royal Exchange, trainee
