For Simon Massey, wealth management director at MetLife, the oft-quoted retirement revolution is under threat by a dearth of product innovation.
According to Mr Massey, the revolution started when the Chancellor of the Exchequer ascended the despatch box and delivered the groundbreaking pension changes in his 2014 Budget speech.
However, industry providers have appeared preoccupied on updating their existing propositions and are yet to step up to the plate and offer a truly innovative solution to meet the needs of pensioners in the new retirement landscape, he said.
“I think providers have been busy getting themselves pension-freedoms ready. I also think that some of them have shown reticence to providing guarantees on their balance sheet for consumers.
The demand for guaranteed income and investment growth has resulted in the proliferation of hybrid products combining an annuity and drawdown.
Mr Massey said: “The problems with those propositions is that, superficially, it might look like you are getting the best of both worlds, but, actually, what you are really getting is the worst of both worlds.
“It is fundamentally a repackaging of last century’s solutions to last century’s challenges to income provision. This century’s challenges are income provision and flexible access, and those propositions simply do not deliver what the customer wants.”
A lot has to be said about the future of annuities in the post-pension reform marketplace amid dwindling sales figures. According to Association of British Insurer statistics, the number of annuities sold continues to fall, with 20,600 annuities sold during the first quarter of 2015 – more than three times less that the 74,100 sold over the same period last year – prior to the announcement of the pension reforms.
Meanwhile, the number of income drawdown contracts sold by ABI members during the first quarter of 2015 increased by 64 per cent over the past year, from 6,700 to 11,500.
He said: “Annuity and drawdown will have a role for certain customer groups, but most consumers want to remain in control of their pots, but like the idea of a guaranteed income. That is why we have innovated in this area.”
The innovation Mr Massey is referring to is Retirement Portfolio: a flexible guaranteed drawdown product launched in September, offering daily lock-ins and a guaranteed income deferral rate of 5 per cent for those investing in the secure income option from the age of 50.
He said that the product was designed in light of research conducted by the provider, which, among its findings, highlighted a significant appetite for three key assurances at retirement: certainty of income, value for money and flexibility.
MetLife has enlisted the services of BlackRock and Fidelity Worldwide to provide fixed income and capital growth solutions, respectively.
When it comes to costs, the guarantee charges start from 0.6 per cent on the secure income option and 0.3 per cent on the secure capital option. MetLife’s active asset allocation has a total expense ratio of 0.55 per cent. But if calculated together with platform and adviser charges, the all inclusive cost could reach upwards of 1.5 per cent.
Mr Massey said: “Guarantees aren’t free, but are highly valuable – I think that is the key thing. It is very easy to get a very cheap drawdown offer, but does it do the job the customer wants? That is the key thing and 82 per cent of people from our research said they want guaranteed income.”
Unlike its competitors with similar products, MetLife adopts an active investment strategy instead of cheaper passive funds.
He added: “For us, it is not about getting something that is super cheap, but something that is a valuable proposition that delivers the guarantees customers are looking for at a fair price.”
The provider has earmarked the launch of a new guaranteed Isa proposition that would deliver guaranteed income or guaranteed capital, according to Mr Massey. The exact details are being finalised and a launch date is yet to be revealed.
With drawdown sales on the upward trend, a number of industry experts have warned that many people will opt for a non-advised drawdown product.
Mr Massey expressed concerns that the lay investor would not fully appreciate the complexity of the product and the risk involved.
He said: “One in 10 people are expected to live to 100. The question is: can the lay investor construct a portfolio to deliver an income that lasts beyond age 100? How would they respond to market falls?
“I believe the best way for investors to have these risk explained and managed is with the help of an adviser.”
However, accessibility to financial advice at retirement has become a pertinent issue in recent times, and continues to remain under the spotlight amid the joint market review by the FCA and the Treasury.
Mr Massey said: “I think where regulation can help is to provide a different type of solution for a segment of clients, where a full Rolls Royce financial planning service is not what is required.”
Outside the office, Mr Massey enjoys keeping fit and healthy, and has competed in a number of triathlons. His other interests include travelling and photography.
Myron Jobson is features writer at Financial Adviser
SIMON MASSEY CAREER LADDER
2014 – present
Wealth management director
MetLife
2009 – 2014
Intermediaries director, Lloyds Insurance Division
Scottish Widows
2005 – 2008: Director of business development
Norwich Union
2003 – 2005
Director of IFA development,
Norwich Union
2002 – 2003
Director of customer service
Norwich Union
2000 – 2002
Head of sales
Norwich Union
1998 – 2000
Divisional manager, North and Scotland
CGU
1986 – 1998
Various roles,
Commercial Union
