It’s hard to remember a more significant twelve months than those just passed.
It might be easy to assume that this should be a quieter year, but looking ahead I don’t think there will be much let up in the pace of change or our requirement to continually adapt.
There are two big trends which will continue well into this year. On the one hand we experienced the introduction of the pension freedoms which have turned the retirement income market on its head and the effects will continue to be felt. The second trend affects every industry and that’s the influence of new technology and the need to evolve according to customer demand.
Looking at the first of these trends we believe that this year we will start to get a far better picture of the new shape of the retirement income market. The pension freedoms unleashed pent up demand for access to savings, and we saw many people accessing cash from their pots in the first few months following April.
The vast majority of pots accessed were small and in Aegon’s case more than 50 per cent were under £10,000. Demand for flexi-access drawdown has also been significant with Aegon’s assets in drawdown up 88 per cent year-on-year.
However, it’s hard to tell what the regular flows of savings into new options will be and we’ll get a clearer picture of exactly how many people are opting for cash, drawdown, guaranteed drawdown, annuities or combinations of each of these.
To my second point, every business is keeping a careful eye on technology developments and the way it delivers its service. We’ve seen countless examples of disruption, whether it’s Uber and taxis or Airbnb and hotels. Businesses need to ensure we stay one step ahead and are in tune with the way customers want service delivered to them, whether they’re an adviser, employer or non-advised customer.
Aegon’s focus is on servicing all of those through continuing to invest in our platform and strengthening the digital offer whether it’s through our ability to give employees a workplace pension they can check and manage from their smartphone or the further introduction of straight through processing to remove paperwork for advisers.
One aspect of 2016 that is hard to predict is how much new regulatory reform we might see. The Budget in March will be significant as we’re expecting the chancellor to announce the outcome of his consultation on pensions tax relief, which could mean a move to a flat rate of tax relief for all or even a pension Isa.
While we’re in favour of a more equitable, flat rate of tax relief for all contributions, we believe the pension Isa would damage pensions by creating two completely incompatible regimes for every pension saver.