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Providing greater certainty in retirement
An insight into a growing market
Richard Sheppard
Malcolm Tyrrell
Agenda
Learning Objectives
What is it like being a Pensioner?
What’s the Problem ?
Two sides to a Solution
Summary
Learning Objectives
• Consider how the world of pensions has changed in recent years
• Outline the many risks of pensions saving
• Outline the many risks of taking an income from a pension
• Discuss appropriate questions to cover in the fact finding process
• Communicate both potential benefits and risks more effectively with clients
• Highlight where long held perceptions no longer hold true
• Explore how advisers can look to offer clients the secure retirement they
wish for
What’s it like being a pensioner?
Source: Living Standards, Poverty and Inequality in the UK 2013 - ONS
Pensioners are now less likely to be Bottom
60%+
fall into bottom
two quintiles
Source: Living Standards, Poverty and Inequality in the UK 2013 - ONS
>40%
Income Sources for Pensioners
Source: Living Standards, Poverty and Inequality in the UK 2013 - ONS
One million over 65’s working
Source: Labour Force Survey ONS 12th June 2013
What is pre and at retirement?
Worry and Expectations
Hope £24,7000pa
63%
not investing
at all
57%
Expectation £259,000
not willing to
take any risk
Reality £525,000
19%
willing to take higher
risks to achieve
higher returns
Source: Blackrock Investor Pulse Survey 2013
22%
feel comfortable
investing in the stock
market
The greatest risk to a clients financial future?
Top four concerns
46% Domestic Economy
31% Spending more than I earn
28% Job security
38%
28% Oil and Energy prices
of investors would move out of
cash if they could guarantee
their investment
Source: Blackrock Investor Pulse Survey 2013
Investment solutions for today’s market climate
Source: DataStream, BlackRock. Data is based on back-tested, simulated volatility until inception and then is based on realised allocations (inception date 10/02/2012, shown approximately on chart by
dashed line). Data correct as of 31/05/2013. Simulated performance shown is calculated net of a TER of 0.24%. Volatility is defined as the annualised standard deviation of realised daily returns over the
previous 60 business days.
12
Decumulation disaster for many
The alternatives
• Do nothing and carry on working
• Income drawdown – flexible or capped
• With-profits annuities
• Phased Annuitisation
• Fixed Term Annuities
• Value protected annuities (tax, inflexible?)
Retirement Income Planning in 2014
Conventional
annuity
solution
Standard
LTA
Enhanced
Annuity
Fixed Term
Annuity solution
(a type of capped
drawdown)
Maturity
Options
Asset-backed
annuity
solution
With
Profits
Unit
Linked
Drawdown
income
solution
Capped
Flexible
Retirement Income Planning in 2014
Conventional
annuity
solution
Standard
LTA
Enhanced
Annuity
Fixed Term
Annuity solution
(a type of capped
drawdown)
Maturity
Options
No investment performance risk during
the term*
Asset-backed
annuity
solution
With
Profits
Unit
Linked
Drawdown
income
solution
Capped
Flexible
Investment performance risk
* Just Retirement’s Fixed Term Annuity has no investment performance risk during the term, provided it is held to maturity.
Today we will discuss
•
•
•
•
•
•
What is FTA?
The retirement advice process: where does FTA fit?
The importance of fact finding
Who is Fixed Term Annuity right for?
Where FTA may not be appropriate
Our Support
Selecting an income
Maturity Options
Fixed Term Annuity
Maturity
Options
Keeping client options open
Conventional
annuity
solution
Fixed Term
Annuity
solution
Asset-backed
annuity
solution
Any UK
retirement
income
product
Drawdown
income
solution
The complete fixed term annuity solution?
Fixed Term
Annuity
Any UK
retirement
income
product
Maturity
Options
Keeping client options open
Conventional
annuity
solution
Fixed Term
Annuity
solution
Asset-backed
annuity
solution
Drawdown
income
solution
The UK’s First Fully Flexible Conversion Feature
What does this mean?
Any UK retirement income product
Any point in time
Any reason deemed suitable by adviser and client
Just Retirement’s FTA conversion feature requires Plan Protection to be selected
Exploding some myths
Holding Vehicle
Focus on
circumstances which
would make Fixed
Term Annuity
appropriate
Changing Circumstances – what may happen?
Keeping options open as a holding vehicle =
client value
The discovery process
Very Important
Guaranteed
Income
Fairly
important
Of Some
importance
a
a
Death Benefits
a
Fund Growth
Maximum
Income
a
Regular
Reviews
a
a
a
Inflation linked
Flexible
Income
Control
Not important
a
Case Study: Jeremy, 59 and Jane, 59
Guaranteed
Personal
Maturity
Pension
Amount
£102,500
Occupational
DC Pension
£190,000
Example is merely a guide to where FTA may or
may not fit into the advice process . It is for
illustration purposes only and is not based on a
real life example.
£76,875
Fixed term
annuity
£25,625
Deeds
Who may now want to consider an FTA?......
Younger
retirees
Where tax
free cash
and no
income
required
Cautious
drawdown
clients
FTA
Those
seeking a
longer term
and better
yield
Income
flexibility
Anticipating
inheritance
Where FTA is not appropriate. Case Study: Alan
£50,000
Example is merely a guide to where FTA may or
may not fit into the advice process . It is for
illustration purposes only and is not based on a
real life example.
Deeds
Unlikely to be appropriate for
Only source of income
Reach retirement age with only
one source of retirement
income. To avoid future lifetime
annuity rate risks will purchase
a lifetime annuity
Enhanced already
Suffering with a significant
health condition that qualifies
for an enhanced lifetime
annuity
Secure income
Looking to make a once-andfor-all decision on the shape of
retirement income. Removing
all future investment
performance risk and future
flexibility from pension fund
Examples are merely a guide to where FTA may or may not fit into the advice process .
They are for illustration purposes only and are not based on a real life examples.
Supporting You
Retirement Income Planning in 2014
Conventional
annuity
solution
Standard
LTA
Enhanced
Annuity
Fixed Term
Annuity solution
(a type of capped
drawdown)
Maturity
Options
No investment performance risk during
the term*
Asset-backed
annuity
solution
With
Profits
Unit
Linked
Drawdown
income
solution
Capped
Flexible
Investment performance risk
* Just Retirement’s Fixed Term Annuity has no investment performance risk during the term, provided it is held to maturity.
Retirement Income Planning in 2014
Conventional
annuity
solution
Standard
LTA
Enhanced
Annuity
Fixed Term
Annuity solution
(a type of capped
drawdown)
Maturity
Options
No investment performance risk during
the term*
Asset-backed
annuity
solution
With
Profits
Unit
Linked
Drawdown
income
solution
Capped
Flexible
Investment performance risk
The Unit-Linked Guarantee (ULG) Market
The long term nature of the
guarantees mean that financial
advisers need to give consideration
to the provider behind the
guarantee.
Source: A guide to Unit Linked Guarantee Products, Defaqto, August 2013
Three Considerations
• Providing ULG solutions in
the UK since 2007
• Weathered market storms
when competitors withdrew
from ULG market.
• Over 85% of ULG pension
market share3
Heritage
Length and breadth
of experience
Poor’s1
• A+ Standard &
• B+ AKG Actuaries and
Consultants Ltd2
• Continuously
investing and
expanding - during
some of the toughest
markets
1Affirmed
Strength
Financial strength
Resource
Expertise and
capacity
• Over 50 on-the-road
guarantee specialists
• Supporting over
5,000 Advisers in the
UK.
• Company of the Year
2010 and 2012 in the
Financial Adviser
Service Awards
28 June 2012.2 October 2012 3 Based on the total 2012 market size from the Towers Watson variable annuity sales survey and MetLife calculations of
33
its new business premium proportion. Source: A guide to Unit Linked Guarantee Products, Defaqto, August 2013
Size of the ULG Market
£1.41 billion
UK ULG Market 2012
£1.41
billion
£923.8 million
£923.8
million
UK ULG pension market
87.5%*
87.5%
MetLife’s market share of
ULG pension new premiums
*Based on the total 2012 market size from the Towers Watson variable annuity sales survey and MetLife calculations of its new business premium proportion.
Back to Basics
Source – Yahoo Finance, 6th January 2014
2007 – 6620.10
Today?
Who may want consider a ULG?
Clients wishing
to retire in the
near future
Those wanting
to ensure their
income
outlives them
Cautious
drawdown
clients
ULG
Investors
wanting
income
certainty from
their pension
fund
Those with a
low capacity
for loss
Clients keen
to protect
their family if
something
happens
Meet Richard
I think I’ll buy an annuity
with my pension fund but I
don't want its value to fall
before I retire
Client:
• Richard aged 50
• Married, three children
Existing
schemes:
• Numerous pension pots totalling
around £100,000
• His employer is looking at AutoEnrolment
Objectives:
• Wants to consolidate to see his
total pension saving under one
roof
• Wants to ensure value from his
contributions
• What I’ve built up I don’t want to
lose
• Plans to make a further decision
at age 60
Recommendation • MetLife Retirement Portfolio
:
• Secure Capital Option
Capital Guarantee in Action
Meet Richard….again
I want to stay invested so I
can grow my pension but
I’m still concerned about
stockmarket losses
Client:
• Richard is now aged 60
Existing schemes:
• Pension fund now £200,000
Objectives:
• Has decided to carry on
working and so does not
want to access his pension
for his income at this stage
• Wants to know about income
levels though – what can he
expect from his fund?
Recommendation:
• MetLife Retirement Portfolio
• Secure Income Option
(deferred)
Deferred Income Guarantee
Richard 3
I want to take an income
from my pension savings
now
Client:
• Richard is now aged 65
Existing schemes:
• Pension funds now at
£215,000
• Secure Income Base at
£XXX,XXX with an income rate
of 4.5% payable as a
guaranteed minimum for life
Objectives:
• Wants to finish working now
and take an income
• Wants to be in a position to
leave something for his family
if he dies
• Wants to make sure the
income can be paid for the rest
of his life
Recommendation:
• MetLife Retirement Portfolio
with Secure Income Option
(immediate)
Learning Objectives
• Consider how the world of pensions has changed in recent years
• Outline the many risks of pensions saving
• Outline the many risks of taking an income from a pension
• Discuss appropriate questions to cover in the fact finding process
• Communicate both potential benefits and risks more effectively with clients
• Highlight where long held perceptions no longer hold true
• Explore how advisers can look to offer clients the secure retirement they
wish for
Protect, Repair and Recover
• We protect your clients investment
• We repair their confidence in equity markets
• We allow their investment to recover its value
Supporting You
• Many documents on our stands
• Lots more on our website
• Regional workshops
• Follow up meetings
In Summary
• The world of pensions has changed in recent years
• There are many risks of pensions saving
• There are many risks of taking an income from a pension
• We discussed the appropriate questions to cover
• We considered both potential benefits and risks
• We have explored how advisers can look to offer clients the
secure retirement they wish for
Important information
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Notwithstanding the foregoing, this presentation is only being provided to professional financial advisers.
This presentation does not constitute an offer or inducement to purchase or subscribe for securities in a product or fund. The information in
this presentation may not be complete and may be changed, modified or amended at any time and is not intended to, and does not,
constitute any representations and warranties of MetLife Europe Limited. The information contained in this presentation is intended to
provide general information only and does not take into account individual objectives, financial situation or needs.
Please remember, if a guarantee option is not selected the value of investments can fall as well as rise. An investor may not get back the
amount invested. Past performance is no guide to future performance. Investments in MetLife products are not like a bank or building
society which accrue interest.
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