Recent monthly sales figures from the Investment Management Association (IMA) showed that balanced and money market funds had been the main beneficiaries of record retail outflows in November 2007. This is the biggest sign yet that investors and IFAs of a nervous disposition are hell-bent on fleeing the perceived risk of equities and property investment for the safety of more cautious options. It would seem that the run on a certain bank last year allied with the current market uncertainty has created something of a trend for mass withdrawal of client funds from potentially sticky situations. No longer the famed British ‘grin and bear it’ approach. The theme that would seem to be missing from the ‘stick or twist’ debate is that most investments should be for the long-term. A glance at past performance charts for equity and property investments over the past century should serve as a timely reminder of the ability for markets to experience occasional reversals in fortune without having a long-term effect. Reference to past performance over the long-term would at least provide investors with a level of comfort in uncertain times. (more…)
Equity release - is this the year?
For a number of years the lifetime mortgage and home reversion markets have been predicted to soar but, while there has been limited year-on-year growth, it still retains the appearance of being slowly awakening. However it is a potential giant.
The potential demand is obvious yet largely untapped: inadequate pension provision, low annuity rates, increasing life expectancy together with high levels of equity built up in property over many years.
At first glance you would assume that the main demand would be to supplement income but the majority of analysis has pinpointed that equity release is mainly used to fund lifestyle aspirations - things like a new car, exotic holiday or home improvements. Other demands encompass things like inheritance tax planning, nursing care, gifting to children/grandchildren and debt consolidation. I’m convinced that the latter is going to become a growing motive particularly with the increasing trend to take out interest-only mortgages without arranging any appreciable repayment strategy. (more…)
Predicted 2008 market downturn could add impetus to growth in guaranteed product recommendations
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…)
Pressure on Government and industry to promote pension savings, says Defaqto
- 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.”
Fund supermarkets increasingly important to SIPPs, says Defaqto
Nearly half of providers marketing SIPPs offer a defined link to fund platforms in their propositions to aid mutual fund trading, according to Defaqto’s Retirement Savings & Income Report 2007.
The figure has risen from 43% earlier in 2007 to 47% currently, with Defaqto expecting the rise to continue as the battle between structured and flexible SIPP propositions intensifies.
Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management and lead author of the report, says: “This movement provides a key example of where sections of the market are shifting away from full flexibility and towards more packaged propositions with tangible process improvements and cost efficiencies.”
“As the search continues for the holy grail of straight through processing and up to the minute online valuations through SIPPs continues, it is inevitable that more of these relationships between investment service providers will be formally established.”
Defaqto’s report also highlights the clamour for other providers of investment services and trading platforms to seek distribution opportunities via the buoyant pensions market.
-Ends-
Trust is Key to Extending Professional Pensions Advice
Defaqto’s recently published ‘Retirement Savings & Income Report 2007 - A review of the individual retail pensions market in the UK’ (1) - shows that many consumers still trust themselves and their family and friends for advice on retirement planning.
Defaqto’s research (2) surveyed 1,000 consumers of which 27% stated that they trust their own judgement when it comes to advice on planning for their retirement, 23% trusted their friends and family and 12% trusted their spouse/partner.
In terms of professional advice, the research showed that overall 28% of consumers trust a financial adviser for retirement planning advice and 24% would trust their employers.
Lead author of the report Matt Ward, Defaqto’s Principal Consultant for Pensions and Wealth Management, stated that “The industry needs to find ways to build trust with the public and this will pay rich dividends in terms of both the amount of business generated as well as ensuring that people get the best advice in this vital area of their personal finances.”
Defaqto’s report also includes financial background information on key product providers 3 as well as data on the intermediaries’ preferred pension products, the evaluation of what is important to intermediaries in terms of product delivery and their assessment of the quality of service received by the principal providers.