Providers are racing to redesign their at-retirement product proposition as they fight for a share of an estimated £3.7bn “prize”, which according to MGM Advantage’s Andrew Tully has been held back in funds ahead of new rules coming into force and could be invested from next April.
Speaking at a self-invested pensions conference in London today (14 October), Mr Tully cited recent data from the Association of British Insurers which suggest that annuity sales are down by more than a third, while income drawdown sales are up by a similar amount.
Predictions since the bombshell announcement at the Budget have suggested sales of conventional annuities could eventually fall by as much as 90 per cent, though relaxed rules around guarantees and which would allow annual annuity income to reduce could help arrest this decline.
Many advisers have said they are holding off making decisions until the full details of rules are announced and new product innovations begin to emerge. Most believe annuities, for example, may continue to have a role, perhaps as part of ‘blended’ portfolio solutions.
Mr Tully said: “The numbers mask the fact that many people, with pension funds estimated to be worth in total around £3.7bn, are simply holding off making any decisions.
“If people were going to choose a drawdown product there are few reasons for them to hold off from doing so. So clearly many people are watching and waiting to see what products and solutions will become available.
Mr Tully concluded: “This tells me there is a clear opportunity to develop new innovative solutions, and the size of the prize is huge for those companies that can develop products that people believe meet all of their needs.”
peter.walker@ft.com
