Unsurprisingly firms such as Standard Life have reported plummeting figures in Q3 results this week. Companies are putting a brave face on it and are adamant they remain optimistic but the raw numbers are down.
Standard Life has reported UK life and pension sales have plummeted 14 per cent to £2.6bn for the third quarter of this year, down from £3.1bn last year. In addition UK life and pensions for the first nine months of 2008 was down 5 per cent to £9.8bn. Sales of individual Sipps dropped 19 per cent to £2.9bn. The firm says the fall should be viewed in light of a particularly strong showing the year before with heightened activity from the post A-Day affect and that is probably a fair explanation for at least some of the fall.
Q3 sales were 20 per cent lower at £815m. In contrast group pension sales increased 10 per cent to £2.3bn. Group Sipp volumes increased 31 per cent and accounted for 31 per cent of total group pension sales, an increase from 26 per cent on 2007.
Standard Life is warning the market generally that 100,000 pension policyholders with balanced managed funds looking to retire this year may not have lifestyling arrangements in place. It says these policyholders could face dramatic falls in their expected retirement income due to the current market turmoil and is urging advisers to ensure appropriate lifestyling arrangements are put in place.
Estimates from Aon Consulting suggest that defined-contribution pensions have plummeted in value from £552bn to £395bn over the past year. Standard Life head of pensions policy John Lawson says: “Taking advice is key here because people do not understand money. Individuals need to be moved from default
funds that do not have lifestyling agreements attached to them to ones that have a phased move from equities.”
There is however a fear that some on the spot recommendations from years ago may not have then been followed up so many people have had more equity market exposure than would have been wise if they were planning retirement soon.
Life offices have inevitably been hit and in response have slapped on market value reductions on their with-profits policies. While this has caused more than a stamp of the foot, it came down to Informed Choice joint managing director Martin Bamford to calm ruffled feathers saying while it is impossible to find any one in favour of MVRs, they are necessary evils at certain times.
The banking bailout has also heralded a sharp rise in the number of income drawdown investors requesting annuity quotations, says Living Time. It says although the credit crunch has been underway for more than a year, evidence suggests it is only in the last three weeks signs of what they call a major capitulation have emerged. Living Time managing director Dave Harris says this is due to security issues. “With share prices falling and dividends being cut, capital risk has fallen off the radar in favour of guaranteed growth and capital preservation,” he argues.
All this makes for pretty depressing market watching but in an attempt to try to look for a positive, perhaps this economic situation will finally wake consumers up and encourage them to start saving rather than spending. Change may not always be seen as a good thing but it could be in this case as people wake up and realize that basic economics dictates bust follows boom. The financial crisis will hopefully encourage people to think before getting their wallets out too easily. For while it is easy to spend today, they need to save to ensure they can be kept in shoes come retirement, whatever that word will come to mean. Of course it is not made any easier by the fact that almost everyone’s crytsal balls seem to be shrouded in confusion at the moment.