As the pension industry enjoys a period of evolution and development, consumers are becoming increasingly engaged with the subject of planning for retirement.
For Tulsi Naidu, executive director of UK and offshore for Prudential, the changes represent a time of great opportunities, for consumers, advisers and, therefore providers too. For her, it is not simply the proposed changes that were announced in the Budget that are of interest, but a general sea-change in the way individuals are viewing financing their retirement.
She says: “What we have seen over the past few months are some very significant changes in the legislative context, but we have also noticed some interesting trends in what our customers have been doing that precede those announcements. As a provider with one of the most significant pensions books in the country and a leading retirement provider we are well-placed to observe the way in which customers are increasingly deferring taking their pension into retirement income. That is due, in the first instance, to the low inflation, low interest rate environment that has existed for a number of years, which has caused people to consider a wider range of options when converting their pension pot into an income.
“Second, customers are coming to the realisation that retirement isnot a one-off event and actually need to think of retirement as a gradual process, with a varying need for income over the time they are in retirement. As a result we had already started to see a rise in alternative solutions and asset-backed annuities, which can give the potential for a rising income but with a guaranteed underpin of income. Many people are prepared to some level of risk to enhance the amount of income they could take in their post-retirement financial planning.
“Since the Budget, we have also seen significant take up of our drawdown proposition, which includes our smoothed PruFund offering, a range of funds rated by risk appetite, and fundamentally appeal to customers looking for cautious, smoothed returns. That is something we do very well and we have noticed an immediate uplift post the budget in sales of that product.”
Although Prudential offers customers a wide range of products, including those suitable for customers seeking to take on more risk because of an increased appreciation of the likely longevity of the investment horizon, Ms Naidu acknowledges that the average 55 year old consumer is cautious in their investment choices at that stage in life. She believes those low volatility offerings are a particular strength for Prudential, but welcomes the way in which the industry is broadening out to include other options.
“What we are ultimately about is providing solutions that give customers choice and flexibility,” she says. “We are known for our market-leading smoothed propositions and our expertise in helping customers access risk-managed savings through products that have a lower volatility characteristic. What the changes announced in the Budget do is accelerate an underlying trend that was gathering momentum already. They create the right context for customers to make choices and we are very supportive of that.