Welcome to the retirement market of the future, where the vast array of products to deliver pension income looks set to increase drastically in terms of both complexity and choice.
19th March 2014 saw the pensions market change dramatically as a result of George Osborne’s budget delivery. We are witnessing some of the most radical reforms to the UK pensions landscape of the past century and retirees in defined contribution arrangements now face greater flexibility and choice with their pensions. Pensions Minister Steve Webb told the House of Commons, “this is an opportunity for the annuity market to provide new and innovative products”. In light of the increased flexibility, new product development is rife with firms recruiting Actuaries with entrepreneurial flair and innovative thinking to give them competitive advantage.
Does this mean the death of the UK annuity market? How will insurers diversify product offerings to present added value in a competitive market? And what’s the impact on the Actuary?
Actuaries have played a central role in product development in many of the world’s leading insurance markets. Their ideas have shaped the design of these products across financial structure, the wordings used to define exactly how these products operate, what conditions apply and what prospective policy holders could expect the product to deliver (within reason) in terms of benefits.
It’s no surprise then that the new challenges presented by the post retirement market are impacting the Actuary by presenting a wealth of opportunity for new product development, showcasing their entrepreneurial skills and forward thinking nature. The ever evolving landscape and pace of change over the coming years as a result of this reform will be at least as rapid; with commercial success depending heavily upon the ability of Actuaries to develop new products and insurers to market these new products quickly and successfully.
But how do actuaries look at the pensions space and understand where to strike the balance between drawdown and an annuity? It’s suggested that opportunity for the Actuary lies at the heart of a ‘flexible income in retirement’ product. With the new retiree predicted to ask more questions about where they are invested and how much income they should take, we are seeing leading insurers launching unit-guaranteed products to enable greater flexibility aimed at the newly liberalised UK market. We are also seeing a move towards launching a ‘one-stop shop’ product, combining an annuity, drawdown and cash account product in one place; an innovative step in a demanding market.
Actuaries now have key roles to play in communicating complex pensions matters alongside being entrepreneurial with this new product development. Additionally, as the workforce ages with many employees being unable to afford to retire, there is new opportunity long-term for Actuaries to engage with HR consultants and the government by using economic and commercial product modelling to think about the implications for the wider economy as a result of a changing workforce.
New Year, New Role? If you are seeking a new opportunity within the Life Insurance market, contact Richard Howard, Manager – Life and Investments Actuarial - now for an open and confidential conversation 0207 6499356 Richard.Howard@ojassociates.com
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