Amid the doom and gloom of economic predictions for the year ahead some providers of innovative guaranteed products in the pensions and investment markets may have more reason to be cheerful than the rest of us.
Having witnessed the success of such products in the US and Japan, providers have decided that the time was right to launch products in the UK. The products are aimed at providing guaranteed capital or income returns and are primarily designed for those seeking to take advantage of these guarantees as part of their retirement planning.
The guaranteed income products have been labelled “the third way” and are seen as bridging the gap between annuities and income drawdown, but variants have been launched which can accept both pension and non-pension monies.
After a quiet start to life in the UK arena a period of uncertain investment markets could herald an associated growth in the use of these guaranteed products as investors seek to bring some certainty to their portfolio. (more…)
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Anyone tempted to buy a pet or who received one for Christmas should not forget that a key part of having a cat or dog is making sure it can be properly looked after when it is ill, says Defaqto in its most recent report, Pet Insurance in the UK 2007.[1]New owners need to look beyond the immediate pleasure of having a pet to what can happen to it over its life. Not only are the costs of treating pets rising, but just as with humans, new treatments are being introduced all the time to improve a pet’s quality of life when it is unwell.
Although there are over 120 policies examined in the report, they fall into two main types: those paying claims only for the first twelve months of an illness only and those that will pay for the whole time the pet needs treatment for that condition, but with a limit on the expenditure each year.
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There has been a lot of talk over the past couple of months about house prices and whether there is going to be a house price crash. The Halifax House Price Index provides one of the best sets of data to show what actually happened the last time we had problems in the market, which could serve as a good pointer to what we could see happening over the next few years.
(SOURCE: Halifax house price index. Chart shows the house price as a percentage of its previous highest ever price)
Often things happen to spur a change in a market, and usually these come completely out of left field. In the late 80s it was the removal of double MIRAS relief, after which house prices began to fall long before the exit from the ERM and interest rates going up to 15% overnight. Today the left field ball is the credit crunch and affordability.
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2007 has been an indifferent year for the UK protection industry. To a some extent the malaise has been the cause and effect of the price war, but the influences of ‘higher beings’ have also played a part.
To start with, HMRC pulled the rug from under the feet of pension term assurance. Sadly, the many millions of pounds spent by insurers developing propositions was ultimately wasted money. If only that money been spent on reinventing income protection insurance!
As the protection industry adopted the ABI’s statement of best practice for critical illness insurance the Financial Ombudsman Service chose to have a pop at the industry. In an interview broadcast on BBC Watchdog on 11th April, Chief Ombudsman, Walter Merricks, said, “On the figures we’ve got it appears that one in five of the people who’ve got CI insurance policies may have policies that are actually invalid.” I’m not sure what figures he’s got but he could be correct if people claim for things that aren’t covered or failed in their duty of disclosure. Perhaps the FOS believes that the best way to avoid complaints is to create an environment where people don’t buy products in the first place!
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Hugh Fearnley-Whittingstall is a great favourite of the Insight Team at Defaqto, with his idyllic cottage lifestyle, his love of great food, and his shop in Axminster being particularly appealing. Living near to a river sounds like absolute Heaven.
But what about all those other people whose addresses are ‘River Cottage’, or ‘Millstream House’ and the like? I’m talking about those people who live close to rivers. The summer floods have brought home how vulnerable some homes are to potential climate change, and how ill prepared out infrastructure is to cope with unseasonal rainfall. Many of those people whose houses were flooded this year are still not back in their homes for Christmas, and will be lucky to get back for Easter.
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Defaqto has launched a buy-to-let home insurance table for the residential market on its Aequos online database. This is the first time that a comprehensive analysis of the buy-to-let market has been made available to insurers and brokers.
The table analyses policies from 32 providers and includes a full listing of policy features, product benefits and policy excesses. Also included is the full policy wording for each product.
The table provides detailed cover information for Buildings, Loss of Rent, Landlord’s Contents, Liabilities, Excesses and additional covers such as Rent Guarantee and Legal Expenses.
Commenting on the new database Mike Powell, Consultant - General Insurance at Defaqto, said: “The table was built following requests from a number of our clients and is the first time the buy-to-let market will be able to access these dedicated insurance policies in one place. It will greatly assist brokers to recommend the most suitable products for their customers and confirms Defaqto’s commitment to providing new and innovative solutions.”
- Ends -
For further information contact:
Mike Powell, Chris Johnston or Luci Mylward
01844 295 454
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- New report identifies problems and solutions -
In its latest report, “Unit Linked Bonds in the UK 2007″ (1), Defaqto examines the pressures that are undermining these saving instruments and how they will affect their appeal to investors.
The report examines the likely impact of the proposed introduction of the 18% flat rate of Capital Gains tax, the implications of the Retail Distribution Review, the growing importance of fund supermarkets and how life companies are likely to react to the growing influence of multi-manager propositions in the consumer investment field.
While all these influences are likely to cause serious challenges to the life companies, the report is far from pessimistic about unit linked bonds. For instance, as a result of CGT changes, IFAs are predicting a drop in business, (2) with 71% seeing a fall of up to 25%, but it is far from terminal. The press coverage proclaiming the death of unit linked bonds seems greatly exaggerated as only 11.5% expect a drop in business of more than 75%.
| Estimated %age drop-off in business placed in Bonds should CGT changes go through |
| No Drop |
32.0%
|
| Up to 25% Drop |
39.0%
|
| 25% to 50% Drop |
16.0%
|
| 50% to 75% Drop |
1.5%
|
| More than 75% Drop |
11.5%
|
Source: Unit Linked Bonds in the UK - December 2007, Defaqto Ltd
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One of the most powerful financial services brands, Standard Life, has decided that protection is no longer for them and has announced its immediate withdrawal from the UK protection market.
Standard Life cites the fiercely price competitive market and the inability to make a new business profit as reasons for its withdrawal. It is true that the market is fiercly competitive but surely before throwing in the towel it might have been worth them showing the same level of commitment to protection as it has shown in the investment market.At the same time it looks like Scottish Widows could also be about to pull the protection rug from under the feet of the IFA. While there has been no formal announcement that the firm is no longer supporting the IFA distribution channel it is no longer prepared to offer quotations through industry portals. This move that effectively puts them outside of the loop and makes their position, at least with IFAs untenable.Standard Lifes decision could be seen as a reflection of a realisation that shareholders have very different demands from policyholders. Scottish Widows, on the other hand, has bigger fish to fry. As part of Lloyds TSB group it can now turn its protection focus to the banks 16 million or so personal customers.
I dont think the withdrawal of these two big boys from the IFA market will have any major impact other than to add to the generally negative perception of the protection industry. Both punched well below their brand weights when it came to protection. This is unsurprising because neither has demonstrated the commitment and product innovation that is needed to provide a quality balance in the price driven IFA market.
Good luck to both of them as they look to make hay in the investment field. I just hope that the investment markets dont collapse around them!
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- Call comes following ABI’s qualified support for Personal Accounts -
In a recent press release (1), the ABI gave its support for Personal Accounts but only on the basis that they add to savings rather than undermine existing pension provision. This position is supported by consumer research (2) carried out for Defaqto’s Retirement Savings & Income report 2007 (3).
This revealed that 71% of those surveyed will be relying on the State Pension to provide them with income in retirement while 49% stated that they will rely on their employer’s pension scheme, 24% will rely on bank or building society savings and 22% said they would be relying on personal pension savings.
Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management and lead author of the report, stated that: “These findings underline the pressure on the Government to better encourage private pension savings and to deliver a successful Personal Account proposition, thereby alleviating future strains on the State system. They also confirm that employers will have a huge role to play in future pension provision in the UK.”
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Just as the FSA is raising doubts about the ability of some advisers to justify multi-manager selection (1), and with the industry in a state of flux, an independent updated guide designed to help financial advisers improve their understanding of multi-manager fund management has just been produced. Called “Blending Talents: A guide to multi-manager investing in the UK”, Defaqto’s latest guide not only contains highly relevant information about the structure, benefits and information on the investment process itself, it also provides a methodology and is crammed with fund statistics to identify likely funds for further investigation.
The guide also comes at a time when the level of fund manager moves in this section of the industry is unprecedented as many fund management companies are positioning, or repositioning themselves in anticipation of further growth in what is becoming the managed solution of choice.
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