Structured products sales boom among pension savers

Since the financial crisis there has been much talk of older investors seeking alternatives for their savings as equity markets remain volatile and bond yields continue to offer poor value. New data from Investec suggests many may be turning to structured products.

Pension and direct sales of Investec’s structured investment plans have increased by 170 per cent and 130 per cent respectively since the financial crisis peaked in 2009, with a significant proportion of the direct investment increase being attributable to clients preparing for retirement.

However, the most significant increase in direct structured investment sales has been from comfortable pre-retirees in their late 50s and early 60s, the firm said.

These investors tend to have good salaries, reducing financial commitments and outright home ownership, with sales of structured investments to these clients have up by 188 per cent since 2009.

Sales of structured investments to wealthy retirees, who usually take out an annuity and enjoy a retirement income between £50,000 and £150,000, have increased 99 per cent over the same period.

High income, wealthy middle-aged investors with six-figure incomes and substantial investment portfolios continue to be the most prolific direct investors into Investec’s structured investments, with a 99 per cent increase in sales since 2009.

Gary Dale, head of intermediary distribution at Investec Structured Products, said: “What we are seeing here is a really interesting shift in our customer base from our traditional heartland of wealthy investors in the workforce to those in pre- and post-retirement.

“They are beginning to see that putting a proportion of their pension savings into structured investments offers an invaluable form of income at a modicum of additional risk.

“As many of these retirees would have had no choice but to buy an annuity before the wide-ranging changes by the government to the annuities market earlier this year, we expect the trend of savvy retirees seeking out additional income via structured investments to continue.”

A February survey of 501 individuals with over £20,000 in assets, revealed that investor concern over market and credit risk on structured products is relatively equal at 50 per cent and 47 per cent respectively.

However, only 16 per cent of investors are more concerned about credit risk – the danger of a product provider falling to repay capital or interest – than market risk on structured investments and deposits when asked which is the greater concern.

Nearly a third of investors are willing to take credit risk on structured products, compared to only 3 per cent for market risk.