Financial consultancy Altus has told FTAdviser it has been engaged by a group of “large companies” to assess whether the new legal framework being brought in for ‘defined ambition’ pensions could be that catalyst for new retirement products that allow ‘risk sharing’.
Speaking to FTAdviser, the firm’s product marketing director William Watling, said that while he was unable to name the companies they were working with, they wanted to identify what the proposition would be and who could carry it out in the UK.
Mr Watling explained that the companies it was consulting for were looking to develop an “innovative proposition that allows risk sharing”, but could give no more detail at this stage.
“It would be aimed at being an advised proposition, but could be made available through platforms, Sipp providers and would also sit within the group pension scheme market.”
He added that while the plans were not directly linked to April’s at-retirement reforms, they were “a happy coincidence”.
Almost three years ago, pensions minister Steve Webb outlined proposals for a ‘third way’ pension scheme structure, aimed to fall in between defined benefit, which places risk on the employer, and defined contribution, which places risk on the employee.
The plans have been pushed through as part of the Pension Schemes Bill - currently making its way through the House of Lords - although it remains to be seen whether the having the legal green light for such schemes will actually encourage any employers to introduce them.
Among the options outlined by Mr Webb were simpler options to add guarantees to defined contribution pension schemes, such as through ‘income insurance’ that would see annuities purchased in the later ‘accumulation’ phase to provide an income fallback in retirement.
The idea is similar to recent discussions around ‘longevity insurance’, which effectively involves buying deferred annuities to provide a guaranteed income in the later stages of retirement and especially to provide for care needs.
Legal and General has previously confirmed it is looking into launching such a product and Partnership, the annuities specialist, has also said it will eventually seek to be active in the market.
Other ideas included employer-based collective defined contribution, or ‘defined ambition’ schemes, which would aim to replicate the successes of similar frameworks in the Netherlands and Canada, where industry sectors often group DC schemes together to share governance, improve investment bargaining power and reap economies of scale rewards.
The shroud of secrecy on Altus’ work is likely to be lifted later in the Spring.
peter.walker@ft.com
