Scottish Widows is developing a simplified direct-to-consumer drawdown offering in the wake of the Budget as the provider looks to launch a guidance service for retirement customers.
The reforms announced by Chancellor George Osborne in March, designed to prevent savers being rolled over into poor value annuity products, present a challenge for insurers who have traditionally only offered drawdown to advised customers.
Scottish Widows chief executive Toby Strauss says the provider will revamp its drawdown proposition ahead of April next year.
He says: “Our existing drawdown product needs lots of simplification. At the moment we only allow someone to go into drawdown with advice, but from next April if you do nothing the default will effectively be to go into drawdown.
“We are creating a much simpler product for those who are already in drawdown and for new retirees.”
Widows is also reviewing the default option for customers who are not engaged and simply roll over into a drawdown contract.
Strauss says: “If you can have an interaction with the customer, you ought to be able to have a conversation about whether the person wants to take any investment risk or simply wants it all in cash.
“But where the rubber hits the road is when we haven’t been able to engage with somebody.
“One school of thought is you should put the member’s money in cash, but if you do that some would argue you aren’t doing the customer any favours because cash won’t beat inflation.
“We haven’t finalised our view on that yet and we are talking to the regulator about what the right answer is for those people, but we do not expect any sort of regulatory safe harbour.”
On providing guidance to savers, Strauss says the insurer is developing a front-end system to help those who do not want to pay for advice.
He says: “It is clear that the guidance guarantee will cover people understanding their options – so what is an annuity, how should they think about annuities versus keeping the money invested, and the tax consequences of taking it all out at once.
“But after that bit of guidance, an individual will need to make a decision about what product they are going to buy. We need a process at the front-end of our product set that deals with that because we think a lot more people will come direct rather than be willing to pay for advice.
“We think quite a lot of this will be done through a combination of digital and a short phone call, but this is new for all of us so we will see how it develops.”