Pension reforms ‘favour asset managers’

The Budget’s reforms to pensions legislation will favour future success for asset managers over life assurers, with Barclays rating both Henderson and Aviva underweight, Daniel Garrod has said.

Writing in a research note, the equity analyst at Barclays said the reforms will increase the importance of distribution and the advantage of size and brand for firms, while those with “alpha generation” are likely to benefit most from rising numbers of consumers in the self-directed market.

He said the bank favoured wealth advisory services such as FTSE 100-listed companies St James’s Place and Hargreaves Lansdown, as well as fund management groups such as Legal & General, which owns platform Cofunds, and Schroders.

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Mr Garrod said: “Life assurers didn’t budget for the annuity changes announced on 19 March that reduced the compulsion for annuity purchase and significantly raised Isa limits. The move was unexpected and dramatic.”

Barclays’ initial assessment was that there could be at least a 75 per cent reduction in annuity purchases, with most opting for income drawdown.

Meanwhile, Mr Garrod said the bank had identified “several winning characteristics” from the regulatory reform.

He added: “Changes to annuity purchase favour asset managers over life assurers, while the number of IFA exits from the market encourages the growth of direct-to-consumer platforms at the lower end and premium advisory models for the more affluent.”

Adviser view

David Gibson, IFA at Londonderry-based Gibson Financial Planning, said: “From our own firm’s point of view, 2013 was the best we’ve seen yet. We are now getting more inquiries than ever. Clients are coming to us either because their existing adviser has exited the market or because they’re becoming a lot more aware of what they’re paying for, even direct. While I think the Budget pensions changes are good for clients, I don’t see them going to large platforms directly to manage things themselves.”