This week’s surprise announcement from George Osborne is expected to provide a further boost to the DC pensions market whilst similarly re-energising design of long term income products.
First, there have been fears that Auto Enrolment opt-out rates will surge as the big social experiment moves downstream to the SME / micro employer market – with much of this concern based upon Joe Public believing that annuities represent poor value for money. This move could see more people taking the first steps to an improved retirement lifestyle as pensions shed their ‘inflexible’ tag.
The ‘at retirement’ market will see increased activity as firms consider innovative ways for individuals to optimise their retirement nest egg. Of interest will be how this market interacts with the Chancellor’s ‘guidance guarantee’.
And perhaps the loudest cheer of all: the expectation that the second part of the Auto Enrolment project – how do we incentivise people to save more for a decent retirement outcome – will receive a hefty nudge forward. People may not have money swilling around awaiting investment, but when they have a few bob to spare, the workplace pension scheme will in future appear far more attractive to many than it once did.
The challenge for the industry?: let’s ensure that our new world retirees have access to expert advice to enable a long and prosperous retirement. And on the way, we need new thinking around Default Investment Options. As the cheering dies down, now is the time for advisers and providers to step up to the plate.