But while they may have “peaked” in the first half of last year, according to Clive Bolton, managing director of life and pensions, they are still coming through.
Ultimately he says, it is up to the adviser to get it right. “Technically the responsibility of the quality of the advice is with the adviser, but if they are a regulated adviser, that’s where the consumer protection is.
“Our products are at the lower end of the risk spectrum – the products that LV manufactures often come with guarantees of smoothing.”
He is quite relaxed about not being the target of some dubious practices, where advisers may be steering clients to unsuitable products. “I’m not saying that doesn’t go on, but we don’t offer those types of [high risk illiquid] things.
“I think it’s dreadful what’s happened to some people’s pensions. I genuinely think transfers make economic sense in some circumstances and in some circumstances they don’t make sense.
Providers need to do more to help advisers and clients in this space, to move money between different generations, particularly if it is tied up in a house.Clive Bolton“I think the simple answer is [it is suitable] where the transfer value offered is high enough to provide a similar level of benefits on a low-yield assumption.
Mr Bolton joined last month following the departure of John Perks to head up the Police Mutual later this year, and he held a similar position at Aviva – a much bigger and publicly quoted company.
They are similar in a number of respects, but the focus for LV, a mutual insurer, is on the “low risk mass affluent”.
LV likes to think of itself as a “pension consolidation” company, and offers a number of retirement options, including a retirement account that allows people to have a blended solution of drawdown and fixed-term annuity, depending on their circumstances.
But Mr Bolton says he plans to develop new products in the protection area, and to fulfil the developing desire for people to pass their wealth down the generations.
“Providers need to do more to help advisers and clients in this space, to move money between different generations, particularly if it is tied up in a house.
“We’re trying to respond to that intergenerational desire.”
Now that pension freedoms have settled down, Mr Bolton is clear that the demographic that needs most help is this “mass affluent” group, which has a substantial amount of money by most standards, but an array of decisions to make as their situation is not as easy as if they were super rich.
“They don’t have as much money as a million pound pension; they need to manage the downside: a 10 per cent reduction may mean the difference between leading the life they live [or not].”
While they are still relatively low risk, this group cannot afford to lose a huge amount.
“You have to have a substantial pension of £100,000 to £200,000 before your state pension is less than half your retirement income.”
LV still offers annuities, but these are fixed-term annuities, which would be suitable for 50 to 65-year-olds, who can take a view at that age, get some level of guarantee and then take another decision with the remaining money a few years down the line.
These FTAs can fit together into a self-invested personal pension wrapper, known as the Flexible Transitions Account; Mr Bolton says: “I think that’s something we’ll definitely build on and help financial advisers to construct good portfolios.”
Another element of the Flexible Transitions Account – the Retirement Account – has three tiers: “Conventional funds, such as the BlackRock tracker, accumulation and drawdown,” says Mr Bolton.
He adds: “Within that, we offer straight investment funds, smoothed funds, which smooth the volatility, and which have an investment guarantee that means you can put a floor on your investment return.
“You can build up your portfolio that suits how you want to retire – if you’re going to retire at 60, you’ve got 30 years of your life left.
“If you enter your retirement at 60 you are not trying to second guess what happens as you might do if you bought an annuity, but [with our products] you have more certainty and guarantee of your income, than if you put it into a Sipp.”
One of the more interesting avenues LV has explored during the past few years is the purchase of a majority stake in Wealth Wizards three years ago.
The intention was to develop an automated advice service in the retirement area. However, this part of the business lost £7m in 2017, and £5m the year before.
Mr Bolton, now in charge of the division, is fully supportive of the business.
He says: “Wealth Wizards is a good example of where we’re starting to use fintech to help.” It is still about helping the mass affluent make the right decision, based on the information they input into the system.
Clearly Mr Bolton has only just got his feet under the table, but with long-term experience at Aviva, plus time spent at the International Longevity Centre, he will have plenty of perspective to bring to the growing mutual.
Melanie Tringham is deputy features editor of Financial Adviser and FTAdviser.com
