Friends Life UK chief executive John van der Wielen says the UK pensions market is set to shift away from focusing on product sales and towards a model where insurers prioritise building assets under management.
The provider’s first quarter results, published this morning, revealed a 42 per cent surge in year-on-year sales, driven by a 49 per cent increase in corporate benefits new business.
However, the firm warned annuities sales could drop by up to 70 per cent as a result of radical liberalisations announced by Chancellor George Osborne during this year’s Budget.
Van der Wielen says the Budget reforms will accelerate the UK market’s transition to a wealth management model.
He says: “We should delete the term product because the UK market has always been quite product-centric.
“The reality in a modern wealth management market is you manage your assets throughout your lifetime.
“I think the UK market will quickly transpose into an assets under management market with asset allocation and the way customers access those funds the focus. It will be a lot less about the products.
“Everyone will have different needs based on a variety of factors, so it is about how you allocate your assets and how you wish to drawdown your pension pot.”
Van der Wielen also suggests further reforms to pension tax incentives could be necessary to boost pensions adequacy in the UK.
“We know the UK is under-saved and we know we have an ageing population,” he says. “Most Governments will address reform by providing ease of access, which the UK Government has done through the annuity reforms.
“However, you need to back up that positive change with incentives to save. The reality is if people continue to retire with small pots then whether you do or don’t annuitise is almost immaterial.
“In Australia with compulsion, the average pot size quadrupled in 10 years – that is essentially what we need to achieve here in the UK.”