Pensions needs more innovation, says Primetime's Warwick

Russell Warwick, who joined Primetime Retirement in January this year, commented on the range of products already in existence for people approaching retirement, but said despite the choice available, these products were not making the right impact.

He said: "If you look at the recent Retirement Outcomes Review (ROR) from the Financial Conduct Authority, you can see there are plenty of product opportunities and products in the marketplace already that, for some reason, are just not working their way to consumers in the way the industry would want.

"This doesn't mean to say the manufacturing side doesn't have things to do to improve propositions - it certainly does. I can see that, over the next few years, there will be innovation on the manufacturing side.

Over the next few years we will start to see innovation that tries to get under the skin of investors [and address their] needs in retirement. Russell Warwick

"This would be in terms of products such as capital-protected investments and longevity-invested types of investments."

He said there would also have to be innovation on the distribution side, in terms of how advisers interface with consumers to start with, and in terms of how advisers can assess a client's true capacity for loss and capacity for accepting investment risk as they go through retirement.

According to Mr Warwick, there will also need to be more creativity in the support services and investment tools that are used by financial advisers.

He told FTAdviser this was because there was currently a big focus on how to advise on investments during the accumulation stage, but few tools that were appropriate for the decumulation stages post-retirement.

He said: "I can see there will be innovation in the financial tools marketplace. Many of the tools that currently support advisers in making decisions in understanding capacity for loss and attitude for risk were developed for the accumulation phase. 

"But the differences in decumulation are very significant, so I think over the next few years we will start to see innovation that tries to get under the skin of investors [and address their] needs in retirement."

In terms of what Primetime Retirement plans to do, he said it was important for the provider to continue to improve its proposition. He pointed out that the provider has already increased the number of terms it offers and introduced part years, in response to feedback from advisers.

There has also been feedback on Primetime's suggestion of introducing a 'rainy day fund' within the fixed-term annuity space, which Primetime is looking at developing.

"Beyond that we are also looking at options to package the proposition to move into the accumulation as well as the income marketplace, where we see strong possibilities for that in the future", he added.

We need to be realistic about the fact that their introduction will more than likely see individuals choosing them as a path of least resistance. Simon Harrington

Mr Warwick also warned that the government and regulators should not stifle innovation in the market in their push to create default pathways and make the pensions journey smoother for as many consumers as possible.

While he lauded the work done by government and regulators post pension freedoms, he said the focus needed to be on signposting people to proper advice over their pension options.

Referring to the work and pensions committee's April proposals, which included introducing pension default pathways for non-advised drawdown, Mr Warwick said: "There is a role for default as a last resort, but we need to make sure the focus is on how to get more people to engage and take good-quality advice."

At the time, Simon Harrington, senior public policy adviser for the Personal Investment Management and Financial Advice trade body, warned: "We are not philosophically opposed to the introduction of default pathways, but we need to be realistic about the fact that their introduction will more than likely see individuals choosing them as a path of least resistance.

"We have two concerns surrounding this; namely that drawdown will be marketed as a default choice in a manner similar to annuities pre-freedoms and that individuals will remain with their provider and not engage on the open market to best assess their options.

"In our view doing so will increase rather than reduce the potential for long-term consumer detriment."

simoney.kyriakou@ft.com