Gauke tells insurers 'adapt to offer value for money'

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Gauke tells insurers 'adapt to offer value for money'

David Gauke, secretary of state for work and pensions, has told insurers to adapt their retirement income services to emerging trends.

Mr Gauke used his first public speech since he took up his new job at the Department for Work & Pensions to boast of the huge success of automatic enrolment - as well as make a public gaffe by calling the new single guidance body an "advice body."

By automatically enrolling people into workplace pension-saving, Mr Gauke said the government had reversed a decades-long decline in participation, and improved millions of workers’ future prosperity.

Latest estimates show that over eight million individuals have already been enrolled, a figure that Mr Gauke said is projected to grow rapidly. 

A total of 600,000 businesses and employers have got behind the scheme, fulfilling their duties so their workforce can start saving and Mr Gauke said “the bedrock of this success has been the sustained consensus between industry, government and other stakeholders”.

But Mr Gauke said: “We still have a lot to achieve. The Conservative Party manifesto commits us to expanding pensions entitlements to include workers who are self-employed. 

“Just as before, this may feel an overly-ambitious challenge, but I have reason to feel positive.”

Speaking to a packed room of insurers at today's (4 July) Association of British Insurers long term savings conference, Mr Gauke said: “I would encourage the pensions sector to see the potential that new savers will bring. 

“By adapting your services to emerging trends you will better serve individual savers, by increasing the value-for-money they will reap from their retirement saving - a goal that we all share.”

Mr Gauke said providers should get to know the new pensions landscape.

He said: “It is about informing consumers and supporting them to make the right choices. 

“Look at how you communicate with your customers, and consider adapting your products to the new types of saver entering the market.”

Abraham Okusanya, founder of FinalytiQ Limited, said when then chancellor George Osbnorne introduced pension freedoms he shifted the retirement income system from one built on “safety first” to one that was designed to ensure people “screw themselves over.”

He said people “in the middle” who can’t afford financial advice but do have a fair sized pot and are looking to go into drawdown “have very little support”.

Mr Okunsaya said these people had been left having to try and figure out on their own if they were going to achieve a sustainable lifetime income by going into drawdown.

Speaking during a panel session at the ABI conference, Mr Okusanya said these people needed support such as guided drawdown that would mimic the typical spending habits of someone in retirement.

Mr Okunsaya said: “Why is it so difficult to have default funds with guided withdrawals so when people go into this they are not on their own? 

“Maybe we have a simple rule that says you can pull cash but in years following negative returns for your portfolio you freeze your spending.”

emma.hughes@ft.com