Pension professionals are divided between those wanting radical product innovation and others who repeat the long-held mantra that the industry needs stability.
The pension minister, a former director of the Fidelity Retirement Institute and a senior consultant at a workplace pension firm with a mission statement to “transform the quality of our industry”, are all demanding more product diversity.
But the Association of British Insurers and Aviva defended the current range of options for pension savers.
Baroness Ros Altmann told FTAdviser the innovation she had hoped for in 2014 after the pension freedoms were announced has still not happened.
“We have not seen many new products yet. I understand the industry is coping with a lot of extra volume as a result of auto-enrolment, and the pensions dashboard is going to require co-operation, management time and so on; but that doesn’t stop companies maybe offering new products.”
David Dunn, former director of fund manager Fidelity’s Retirement Institute, agreed the industry’s response has only led to incremental innovation in products, not the needed transformational change.
“We’ve been less good with the latter and a part of that is because we’ve been handicapped from the generous tax breaks that pensions have,” he said at a recent panel debate held by Aviva.
“Going forward we do need to try and think more creatively.”
John Reeve, senior consultant at Premier Pensions Management, said decumulation and financial education are two areas in dire need of fresh thinking. “There are too many similar products, we need some form of disruptive innovation to re-energise the industry and the public’s view of the industry,” he said.
After pension freedoms, reductions in the lifetime and annual allowances and the incoming Lifetime Isa, not all are keen for more change in the pension sector.
David Snailham, director at compliance firm Compass Risk Solutions, said there’s a danger the industry ends up innovating for the sake of it.
The ABI’s retirement policy manager Rob Yuille argued current options in the market are a “good mix”, with more likely in the pipeline.
“Innovation in the pension market did not start in April 2015, the retirement income market had already evolved to give people higher incomes, to try and achieve the right balance of flexibility and security.
“It is an ongoing process and the dilemma for customers and for policy makers is to try and strike the right balance of flexibility and security.”
John Lawson, head of financial research at Aviva, defended the product providers and noted commercial success determines new launches.
“The market had already been quite good at innovating, some of them did not sell and some of them looked quite attractive on paper, but when it comes down to explaining that to a customer it becomes a lot more difficult.”
ruth.gillbe@ft.com
