In the last few years, we’ve witnessed a period of rapid transformative regulatory change in the retirement market. But now, there is a moment of relative calm - at least before the next storm.
Advisers and retirement providers should use this time to ensure they are equipped to create compelling propositions for their customers, before the next regulatory roller coaster.
The UK government has big fish to fry as it navigates our way out of Europe. And there was a significant absence of pension reforms in the recent Budget. This means that for the first time in a decade retirement providers and advisers are realising they may be able to take control of their own destiny.
In this window, we predict a modern and customer-centric focus emerging from existing providers to address the needs of a more self-sufficient, digitally-orientated customer, facing a more complex set of retirement choices.
This will require collaboration with third parties who can play a complementary role in supporting a customer.Banks, advisers and retirement providers are waking up to the idea that now is the time to reinvent retirement, building a proposition around the customer, rather than the regulatory need.
Of course, the two are related. Freedom and choice, RDR and auto enrolment all had customer interests at heart. But so often the obligation to comply, and the stifling effect of legacy on the speed of change, has left providers hurtling towards their next regulatory deadline with a long list of compromises forced upon them.
The phrase ‘minimum viable product’ became translated to ‘the least we can get away with’.
Our new retirement research asked senior executives from the 14 major UK retirement providers for their opinions on how they are adapting to the emerging retirement landscape – all of whom see a bright future.
Nearly three fifths (57 per cent) predict that dramatically different propositions will emerge – which we’re coining ‘retirement reinvented’.
So what will ‘retirement reinvented’ look like? Time will tell, but we think providers will take a far more holistic view of the goals their customers are trying to achieve and how they hope to achieve them. This will require collaboration with third parties who can play a complementary role in supporting a customer.
For example, look at Aviva’s recently announced collaboration with Facebook. Our research also finds that using data to tailor customer experiences will be increasingly important, with two fifths (42 per cent) already believing that they have already made progress in better using data to inform, segment and manage customer experiences.
There are also collaboration opportunities for retirement providers who are rapidly focusing on the synergies of the pension dashboard initiative alongside the PSD2 open banking changes.
These drive a significant opportunity for providers to develop an accumulated view of wealth and a powerful platform to drive aggregation with associated guidance and advice services.
In the meantime, ongoing debates on pension tax reform, the definition of advice, auto-enrolment, long standing customers and the EU’s general data protection regulation will sustain high levels of regulatory risk.
Transformational proposition change will also alter the profile of conduct risk, an area that is anyway rapidly adjusting. Finally, an increasingly digital, social media-oriented approach to engagement will have its perils in terms of identity theft and other forms of financial crime.
But on balance, we have a government that abandoned the secondary annuity market and has so far refrained from Pension Tax reform.
And we have a regulator that’s established a regulatory sandbox for innovation and is actively promoting the growth of RegTech. The barriers to doing something revolutionary are diminishing, and the risks of not doing so are rapidly growing.
So if you’re active in the retirement market, now’s the time to reinvent it.
Mike Teall is financial services expert at PA Consulting Group
