Key discussion points:
- There has been huge growth in the retirement income market since the introduction of Pension Freedoms. The retirement landscape has become more varied and complex with retirees facing far greater choice around how and when to retire and, in particular, how to secure the income they need to sustain them in retirement. An increasing number of clients are trying to make these decisions for themselves.
- The new retirement landscape is in its infancy and much change is still to come. In July 2019, three regulatory papers were released in one hit. That is a huge amount to get through but they contained items that could have a big impact on the market.
- Jon suggested that contingency outcomes may be banned. He also highlighted that whatever has been discussed for the non-advised part of the industry should be studied as there are likely to be ‘read acrosses’ to the advised market.
- Investment pathways will be in place from August 2020 and with it will come a downward pressure on costs. Providers will need to come up with four investment pathways or, if they are smaller providers, outsource to those who can. As the wrapper and fund costs have to be less than 75 bps, the underlying investments are most likely to be passive trackers rather than managed funds. If a client asks to take their fund in cash, their Adviser will need to inform their client about investment pathways.
- Jon’s view is that the already considerable advice gap will increase as a result of investment pathways.
- There was a view that investment pathways do not take into account a client’s wider circumstances and that the conversation may become “which pathway do you want?” The pathways may also encourage clients to focus on a single route, which may encourage people to either cash in or continue with existing investments.
- It is thought that Master Trusts are seeing investment pathways as a good model of what they should offer their clients.
Expert: Jon Hogg, Old Mutual Wealth
Facilitator: Colette Dunn, Milliman