This sentiment is one that resonates with Ronnie Taylor, distribution director at Scottish Widows, who oversaw the contentious axing of 130 jobs in his tenure as pensions and investments director.
This was offset somewhat by the creation of 45 new roles and the formation of a corporate relationships team of about 100 pension specialists and 30 business development managers to manage relationships with key advice firms.
Scottish Widows' telephone distribution team was also expanded.
“That was my call,” Mr Taylor said.
“It was a very difficult decision to make. It reflected the changes we wanted to make in the business. We found that more clients wanted to deal with us digitally or over the phone and speak to specialists, and felt that we needed to change the shape and size of our relationship team.”
A fall in profits was also a significant factor behind the move, he added. The group recorded new business profit of £101m in 2014 – a year-on-year fall of 60 per cent.
As contributory factors, Mr Taylor pointed to the advent of the charge cap on work pensions at 0.75 per cent and a fall in annuity sales following the announcement of pension freedoms in the 2014 Budget.
Association of British Insurer statistics show that sales of annuities are on the wane and are now consistently lower than sales of flexible retirement income products.
The shrinking annuity market has seen rival LV mull over a potential exit from the enhanced annuity arena. Earlier in November, Standard Life took a step further by ceasing annuity offers to new customers.
Will Scottish Widows follow?
The short answer is no. The matter has never surfaced at boardroom level, according to Mr Taylor.
He said: “For us, we want to offer customers a wide range of income choices at retirement. A smaller number of people want to take out an enhanced annuity post pension freedoms, but there are still a significant number of customers who value having a certainty of income at retirement.
“The suitability of an enhanced annuity is down to individual circumstances. Customers would have to consider how important something like death benefit is to them. You also have to remember that drawdown carries investment risk.”
Secondary annuities
The industry breathed an almost audible sigh of relief when government plans to introduce a secondary annuity market were scrapped. The initiative was rebuked by many industry commentators for adding an extra layer of complexity in what is already a complicated retirement playing field.
Mr Taylor revealed that Scottish Widows would have been a participant in the marketplace, but not as a purchaser of annuities. He said the firm would have acted as a facilitator of annuity sales to other providers.
He said: “The whole drive towards giving people greater freedom at retirement is welcome, but with that level of change, there is a degree of responsibility. We had concerns about getting the right deal for the customer. Taking more time to think this through makes sense. Whether the plans will resurface in the future remains to be seen.”
In March, the company announced that its pension proposition will be given a £50m cash injection over an 18-month period in a bid to improve customer service and adviser support as well as enhance the digital support offered to corporates and individuals.
The firm also revealed plans to overhaul its investment fund range to reflect changes in consumer needs following the unlocking of pensions.
To this end, it now offers three glide paths that are geared to investors who seek to purchase an annuity, cash in their nest egg or put it into drawdown at retirement respectively.
He said: “We have also tidied our range of retirement funds. So assets in funds that are not being used or simply have low assets have been transferred to a newer equivalent fund, which is usually at a lower cost.
“We also offer new investment solutions that have different asset mixes rather than the traditional equity and cash mix. We offer higher volatility and absolute return funds. It cost a bit more, but has the potential to generate an impressive return over the long term.”
More efficient
Mr Taylor said the business is more efficient than it was two years ago, but admits more needs to be done to improve the company’s bottom line.
He declined to disclose in numerical terms how the changes in the business have impacted profits and revenue, but the group’s most recent annual report (2015) shows profits spiked from 2014 by £38m to £143m for the year ended 31 December 2015.
However, greater scrutiny of the report revealed that the gross premiums from investments, protection, retirement income, individual and corporate pensions fell by £183m to £707m.
This suggests that the group has not been immune to the challenges facing the life assurance and investment sectors.
RONNIE TAYLOR'S CAREER LADDER
October 2016-present
Distribution director
Scottish Widows
2013-2016
Pensions and investments director
Scottish Widows
2012-2013
Chief executive officer
Vebnet
2011-2012
Chief executive officer – client management
Standard Life
2010-2012
Managing director – retail
Standard Life
2010-2012
Chief executive officer – wrap platform
Standard Life
2007-2009
Business development director – international
Standard Life
1997-2007
Various
Standard Life
1996-1997
Business development actuary
Scottish Life
1988-1996
Various
Scottish Provident
