Last December, FRC’s (Financial Reporting Council) Board for Actuarial Standards published a new version (2.0) of Technical Memorandum (TM1): Statutory Money Purchase Illustrations (SMPI). Two key areas of change embedded in the document is in the updating of mortality assumptions and the taking into account of potential investment returns when setting the long-term investment assumptions used in projections.
SMPI an opportunity not a chore
January 20th, 2012Dunstan Thomas launches ‘Changing Face of Retirement Planning Market’ eGuide
December 6th, 2011Dunstan Thomas, published this week a 37-page eGuide entitled ‘The Changing Face of the Retirement Planning Market’, following extensive research of pensions-focused IFAs and product providers throughout this year.
The guide lays out the full findings of the most extensive research of the pensions market that the leading retirement planning administration software and services provider has ever conducted. Dunstan Thomas’ research probed the market’s views on all key developments likely to impact the market over the next two years.
Both audiences gave their views on the likely impact of recent pensions and financial advisory market reforms including the abolition of compulsory annuities; product disclosure changes; new EU legislation changes; RDR; wrap platform revolution and much more, in their responses to an extensive survey which is detailed and analysed in the guide.
The Dunstan Thomas guide also contains articles on the annuity market opportunity; top tips for compliant migration of assets onto platforms; and a disclosure update for platforms and product providers. It finishes with an article which is focused on the next generation of retirees – Generation X. In it Dunstan Thomas offers ideas to help stimulate this vulnerable generation to save for retirement and reduce the numbers of ‘Gen Xers’ likely to grow old in abject poverty.
Chris Read, chief executive, Dunstan Thomas explained:
“This guide forms a useful and informative overview of the seismic changes that are impacting the world of financial advice and retirement planning. The combined pressures of the economic downturn, pensions reforms, RDR and the demographic time bomb are already altering the market in a significant way. We answer some of the more difficult questions through analysis of your responses to nearly 40 questions we put to providers and IFAs earlier in the year.”
Request a copy of the Business Guide entitled Opportunities in a Regulated World
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Notes to editors:
Journalists that would like a copy of the guide are invited to go to the above link or call Miles Clayton on 01992 587 439. Agility PR can also provide management summaries of the research and raw findings if preferred.
About Dunstan Thomas:
Dunstan Thomas is a leading retirement planning administration software and services provider offering a fully integrated range of components under the Imago brand. These components together provide the key back and front office administration tools needed by pension providers, third party administrators and financial advisers. Imago’s Front Office administration components include Illustrations, Reviews and stochastic models in Adviser Tools. Imago’s Back Office tools include Administration and Property.
Dunstan Thomas’ Imago is now establishing itself as a highly functional platform for servicing not only pensions products but also supporting Wrap platforms to help them generate increased efficiencies and automate calculations, illustrations and provide all relevant reporting capabilities.
For further information about Dunstan Thomas please contact:
Chris Read, chief executive
Dunstan Thomas
Tel: 0239 282 2254
Email: cread@dthomas.co.uk
For Dunstan Thomas UK media enquiries please contact:
Miles Clayton
Agility PR
Tel: 01992 587439
Email: miles@agilitypr.co.uk
Post-Retirement Market Boom creates opportunity for platforms
June 17th, 2011An industry-wide study that we commissioned in April 2011 found that both IFAs and pensions providers alike predict a strong future for the annuity market despite the imminent abolition of compulsory purchase of annuities aged 75. Over half of the sample of more than 120 IFAs we questioned (52%) think that the value of the annuity market will stay the same as it is today or grow in the future.
Providers are no less positive about the annuity market – 42% think the annuity market will remain at the same size while 6% think the market will grow. These findings seem illogical in view of the pension reform but we think they point to the beginning of a boom in the post-retirement market which annuities will benefit from. More interestingly, wrap platforms and Direct to Consumer (D2C) platforms may be best placed to take advantage of this boom. There are three major factors at work which lead us to this conclusion:
Firstly, and most obviously, is the much-discussed demographic time bomb. ‘Baby Boomers’ are retiring. The most significant and consistent rise in birth rates in the developed world in the last century was between 1946 and 1957. A person born in 1946 at the beginning of this boom is 65 years old this year and in most cases is looking to retire as soon as he or she can. Nearly 658,000 UK-based men and women will turn 65 this year, the largest number to reach that milestone in a single year since records began, according to the Department for Work and Pensions. Naturally a percentage of these will annuitise their pensions investments in the UK even if it is no longer compulsory by age 75.
Secondly, the voluntary nature of annuities combined with new capped, flexible drawdown options, we predict, actually provides a significant shot in the arm for the post-retirement market. Choice creates opportunity and engages retirees in making real retirement planning decisions which will influence the size of their bank balances and quality of life in retirement.
Finally, the improvement and subsequent proliferation of modeling, illustrations, calculations and general administration tools to help select the right options; makes wrap platforms uniquely well positioned to take advantage of an inevitable post-retirement bonanza. You only have to look at the Minimum Income Requirements (MIR) calculations demanded for flexible drawdown to realise the need for strong administration around these choices. Platforms can enable much more post-retirement business to be administered more quickly, and in compliance with tightening disclosure regulation, than was naturally possible before.
Some predict an emergence of different types of wraps addressing different parts of the market and based on our findings we would definitely predict success for platform providers focusing on the at and/or post-retirement market. .
There is even strong market demand for the Post-Retirement Wrap. The same survey found that 62% of IFAs think a range of annuities should be offered on platforms and said they would purchase them this way, on behalf of clients, if annuities were on platform; while more than two thirds (68%) of providers thought moving annuity purchase onto platform was a good idea.
The findings suggest that IFAs are perhaps already seeing an opportunity to specialise in helping a growing group of customers in post-retirement. If IFAs can migrate customers onto the wraps that are already geared up for this segment of the market it will be able to serve many more retirees more profitably and successfully because they will be able to provide the flexibility and service levels that they are looking
There is a clear opportunity for current and even new entrant wrap platforms and D2C platforms, to position themselves as comprehensive, blended post-retirement service providers, supporting a growing group of semi- and fully-retired people. Many of these people will want to actively manage their investments working with IFAs or alone. Shares, commercial property, annuities and drawdown options can all be handled from one single wrap. Indeed we may see the Post-Retirement Wrap emerging as at least as strong a niche as the employee-focused Corporate Wrap which has dominated industry discussion in recent months.
Abolition of compulsory annuities proves most popular Pensions Reform according to new IFA survey by Dunstan Thomas
June 17th, 2011Dunstan Thomas survey garners views from over 16,000 IFAs as they prepare for RDR and Wrap Platform Asset Migration Boom
IFAs think the abolition of compulsory annuities will benefit the consumer more than any other major Pension Reform being pushed through this year. 39% of IFAs questioned in last month’s online survey considered this the most beneficial reform while 30% selected auto enrolment as the most beneficial reform for consumers. One in five (20%) said that unbundling of charges would deliver the most benefit.
Over two thirds of IFAs (69%) think the new qualification and training requirements demanded of them by RDR, renders provision of independent financial advice to the mass market quite simply unaffordable.
Increasing transparency around charges is broadly welcomed by IFAs – over three quarters of them (77%) backed full unbundling of charges and 62% gave the thumbs up to clear communication of the impact of charges on performance or Reduction in Yield as it is sometimes called.
But understandably IFAs are divided on the merits of banning commission payments – over two thirds (68%) remain against this move; while 72% stated that the FSA’s judgement that selecting only one wrap platform for the transfer of assets of the majority of clients will have a’ negative impact’ for clients.
They also think that the FSA’s tight definitions of Independent and Restricted advice is not the way to go – 72% thought the FSA had got these definitions wrong.
The audience was virtually split down the middle by some of the other disclosure related changes: 44% said that banning of cash rebates from providers to advisers was the right move while 47% said banning of cash rebates from fund managers to platforms (now widely expected by the industry) was a good move.
Three quarters of the sample intend to remain whole of market IFAs after RDR despite the increasing demands being placed on them; while nearly half (43%) think that 16-25% of IFAs will cease trading because of the new demands placed on them by RDR and 20% think 26-40% of IFAs will disappear.
Despite the pressures imposed by RDR the single largest financial pressure being placed on IFAs this year is actually coming from rising levies being exacted by the Financial Services Compensation Scheme to compensate clients for assets lost as a result of an increasing number of investment firms that are failing – 39% put this issue as the largest drain on their coffers in 2011, whereas 24% cited RDR preparations as the most costly area this year. Transitioning from commission to fee-based advice was the largest financial pressure for 22% of firms questioned.
But it is not all gloom and doom so where are IFAs seeing growth this year? Asset Migration onto wrap platforms is seen as the key growth strategy for 16% of firms while 12% see ‘deepening our expertise in a particular area of the market’ as the route to growth. A slightly smaller number (11%) are outsourcing more aspects of what they do to specialists (e.g. Discretionary Fund Managers) to find efficiencies. 10% are acquiring new business by buying other IFA firms as the consolidation trend picks up pace.
The most significant criteria for wrap platform selection was range of funds and fund managers on offer (with a weighting of 77), closely followed by service levels (69) and unbundling of charges capability (45).
In terms of specific functionality ‘Good selection of risk profiling, planning and rebalancing tools’ was voted the most important factor in wrap selection by 30% of respondents. Online transacting capability was the second most important functional requirement (25%); while strong integration with ‘our existing Front Office and desktop systems’ came in third (16%).
Wrap asset migration speed and progress is also worthy of exploration and the figures show some acceleration in asset migration activity:
• 15% have moved 11-20% of customer assets under management onto wraps already.
• 9% have moved 21-30%
• 15% have moved 31-40%
• 10% have completed 41-50%
• A further 10% have completed 51-60%
But if you ask what percentage of assets they expect to have moved at the end of the migration process the figures are much higher:
• Nearly a third (29%) will move more than 70% of assets
• 16% will move 61-70%
• 13% will move 51-60%
The majority of IFAs expect a near tripling of the total Assets Under Management (AUM) on platform within the next 18 months: 37% predicted £300bn of AUM will be on platform by the end of 2012, up from £120bn today. An even higher number (40%) predict a doubling of AUM over the next 18 months to reach £200bn which is significant in itself.
And those assets won’t just be in investment funds and cash, 62% of IFAs think a range of annuities should be offered on platforms and would purchase this way if it was available. Over half of the sample (52%) thinks that the value of the annuity market will stay the same as it is today or grow despite the advent of the abolition of compulsory purchase of annuities at age 75.
Over half of IFAs (51%) said that wrap platforms need to get better at enabling quick and easy re-registration of assets between platforms. Re-registration capabilities are required by the RDR deadline of 31st December 2012 and the technology is already there to deliver it. Considerable industry pressure demanding this capability has led most platforms to prioritise this capability in recent months.
Chris Read, chairman, Dunstan Thomas, commented on the findings:
“This is the most comprehensive snapshot we have ever commissioned into the views of the bulk of the IFA market. It gives us a great insight into a market which is changing fairly rapidly as hundreds of billions of pounds of assets move from legacy policies onto wrap platforms.
“We also see the consolidation trend accelerating, while those looking for growth are deepening expertise and using technology and specialist outsourced service providers to serve customers more efficiently and proactively. Although RDR looks tough for IFAs right now, it is already driving many firms to plan how they can serve more customers better and transform their businesses by so doing.”
Dunstan Thomas commissioned Agility PR to fulfil the above survey of 16,340 IFAs. Agility PR sent questionnaires via an online survey provider and obtained a total of 127 fully completed questionnaires within a two week period between 21st April and 5th May 2011. This equates to a response rate of 0.76%.
Annuity market set to be buoyed by Baby Boomer Retirement Demand, despite abolition of compulsory annuities, finds new Dunstan Thomas survey
June 16th, 2011The major factor impacting the health of the annuity market is the retirement of the ‘Baby Boomer’ generation1 which is now underway, the survey found of more than 400 providers found.2 This perhaps explains why nearly half of providers (42% of the sample) think the annuity market will remain at the same size despite the fact that compulsory annuitisation aged 75 years was scrapped last month. A small group (6% of the sample) even believe the annuity market will now increase in size.
Major step forward in strategy to build growth through focusing on ‘at retirement’ and workplace savings
March 31st, 2011Dunstan Thomas help power AEGON’s platform.
AEGON UK today announces it will enter the platform market later this year, as it accelerates its plans to focus on the ‘at retirement’ and workplace savings markets to drive future growth. This represents a significant investment in the company’s future development and underlines AEGON’s long-term commitment to the UK market.
CP 11/03 – Illustrations –“even though they are clearly a speculation and not a prediction, they can show the potential for variable returns and may help consumers with planning for future needs.”
March 10th, 2011Last month the FSA consultation paper CP 11/03 was released to improve pension scheme disclosure. In effect the consultation looks to ensure firms give consumers enough information about a product’s charges, risks and main features, so as to enable them to make an informed decision.
