Advisers have urged asset managers not to flood the market with a glut of unnecessary new funds ahead of this year’s pensions overhaul.
Since the need to buy an annuity at retirement was effectively scrapped by chancellor George Osborne in his 2014 Budget last March, fund managers have been racing to conceive product strategies to cash in.
The changes, which take effect from April, are expected to see a greater number of savers continuing to actively invest after retiring, a shift tipped to benefit multi-asset and income-paying funds the most.
A note from broker Numis Securities said last week it expected retail asset managers would see their share of invested assets “grow significantly” in the long term “driven by the shift in pensions”.
But financial advisers said a flurry of new product launches ahead of the April changes would be unwelcome, because the industry was already flooded with too many poor-quality funds.
Jason Witcombe, director of London-based Evolve Financial Planning, said: “There are far too many investment products out there. I would be delighted if 80 per cent of products disappeared overnight.
“We don’t need more products at all. It’s confusing enough as it is.”
David Crozier, managing director of County Down-based Navigator Financial Planning, agreed. “The investment industry will launch new products, but they shouldn’t bother their heads,” he said.
“The new products are just going to be more complicated and inevitably more costly. It is better they just stick to simple products.”
One additional product type under consideration by managers is the so-called ‘lifestyle fund’, where the asset mix is altered as clients age.
But David Smith, wealth management director at Tilney Bestinvest, said he would urge fund managers not to launch more of these funds, as they often used outdated approaches.
Mike Pendergast, director of Chester-based Zen Financial Services, hoped the majority of providers would embrace the pensions changes.
He said they would only need to “adjust their offerings to ensure clients are allowed to take full advantage of new flexibilities”.
Several advisers said they had noticed increased interest from clients who were keen to know how the changes would affect them and what actions they should take.
Alan Solomons, director of London-based Alpha Investments & Financial Planning, said: “Since the autumn, clients are more aware they need to come to advisers.
“Before, they just [thought] ‘we need an annuity’. Now that is not the case at all and a lot are aware of the changes.”
How advisers are adapting
Fund groups are not the only ones eyeing up their wares to see how they can serve customers in the new retirement market.
Advisers are also considering what changes they need to make to their businesses to be in a better position to help retirees.
Devon-based Philip Milton has established a relationship with the Avalon platform and plans to move most of his pensions business away from Transact to Avalon.
Mr Milton said there were “significant reasons” why the move would benefit clients, including a wider range of pension strategies, the ability to trade at any time of day and better prices because now more than £100m of his clients’ assets would be dealt with by one administrator.
