Lerche-Thomsen left Prudential in 2002 to set up the retirement income business. Not only have sales increased every quarter but the rate of growth is also increasing, with sales in March up by 44 per cent on February.
He says: “It is a constant growing story but we are trying to grow at a pace where the service grows with it.”
Lerche-Thomsen attributes the success of Living Time to a genuine desire to give choice and flexibility in retirement income to all clients. “Choice was always available for income-drawdown-type people with big sums of money but not for the middle market or people at the lower end of the market. I wanted something to be inclusive for everybody so that there would not be financial exclusion.”
Living Time offers an alternative to taking out a traditional annuity or drawdown scheme at retirement. Its plan provides a guaranteed income for a set number of years until the client reaches 75. The client can then take up another plan if they are still under 70 or invest their guaranteed maturity payout in an annuity or alternatively secured pension.
Lerche-Thomsen says Living Time has a fundamentally different relationship with its customers from a traditional annuity company. “When you run a lifetime annuity business, your business model is actually based on wanting your customers to die. It is the basic fact that if they die more quickly, you make more money. If they live longer, you can loose money. One of the things I wanted Living Time to have is the philosophy that we want you to live.”
The plan can be set up as a joint policy, so should the policyholder die before maturity, income or a lump sum will be paid to the beneficiaries. Backed by AIG but privately owned, Living Time aims to be “right at the top so we are always in the top five of the best rates in the UK”.
It does this partly by outsourcing admin to Vertex which saves about £1 a month per policy. “There is absolutely no way we could internally ever do it for that sort of low cost.”
Lerche-Thomsen joined Prudential in 1982 after qualifying as a pension actuary. He began running pension schemes and advising on final-salary pensions.
“When I was at Prudential, I had the opportunity to set up a retirement company. From that I built up two companies with the Pru, one looking at individual annuities and one looking at bulk annuities. I set up and built them both to be very profitable areas for Pru. My key mantra at the time was to offer people the best possible retirement income, so that if they could have an extra curry a month or the only curry they have a month or enough to sneak off for a ski weekend, then I was doing my bit for humanity. That was the noble endeavour.
“We were absolutely top in the marketplace. It was built up to be a multi-million-pound market and we took about a 20 per cent share. It only took about three or four years to build it up to that sort of level. We started off with a team of four people and a few years later it was 400 to 500 people.”
As managing director of Prudential Annuities, Lerche-Thomsen remained very hands-on. Every quarter, he would take staff to Reading’s Madejski Stadium for an update on company strategies. Staff were given electronic bleepers so they could vote on strategies which he says gave employees “a sense of belonging that can get lost in huge companies”. This is an issue he hopes to continue at Living Time.
Lerche-Thomsen’s biggest concern is that over the next five years, up to two million people may buy lifetime annuities unnecessarily. “I would strongly suspect that a very big proportion of those would never be made aware that there were alternatives without having to go into the full risk and worry of income drawdown. What he Government ought to be doing is letting people become aware that there is a new generation of products.”
He says the open-market option does not go far enough and people should be made more aware of their choices. “They ought to let customers know that you can have an annuity that is no longer fixed for life. Instead of calling it the open-market option, every person who retires should be given a simple one-page factsheet to explain the other options available.
“Our view is that if lifetime annuities had not been invented and someone was inventing them now, you would never sell any of them. Perhaps in five to 10 years time, the only lifetime annuities left will be those that are bought at 75. Consumers demand ever increasing flexibility and will not put up with fixed rates.”
He would eventually like to see Living Time offer a whole series of services to people in retirement. “Be it medical care or equity release, there is a range of stuff we can move into. We will expand to become a major provider in the retirement income area.”
His ambition is not restricted to business opportunities. A keen skier and meteorologist, he hopes to combine these passions and ski across the top of Greenland, making the most of his own living time.
Born: London, 1952
Education: Sevenoaks and Brunel. Fellow of the Institute of Actuaries. Fellow of the Royal Meteorological Society
Career: 2004-present – chief executive and founder of Living Time; 2002-04, chairman, AssetCo; 1982-2002 – Prudential, including managing director of Prudential Annuities from 1997-2000 and chief executive of Scottish Amicable from 2000-02
Likes: Action-minded people who get things done and people with a great attitude
Dislikes: People who let him down or have a poor attitude
Favourite book: Where to Ski and Snowboard
Favourite film: A Beautiful Mind
Favourite album: Dark Side of the Moon by Pink Floyd
Career ambition: To successfully build a retirement income business
Life ambition: To make a difference to people’s retirement
If I wasn’t doing this I would be … Researching and writing a guide to lesser-known ski resorts or being a meteorologist