The Good news is that Billy and I have worked out our April Fool for 2011. We think it is a cracker but then we would. The other good news is that my feet have not touched the ground since returning to the UK from my European excursion.
We came up with the idea of an April Fool because I was doing some data analysis on annuity rates for a presentation and thought I had come across a real April Fool. “Billy” I said, “what date is it? – because I think someone is playing an April Fool on me”. They were not. This is true. I regret to say that the industry has now gone too far and it is time to shine a light on the issue of postcode annuity or, as some like to call it, lifestyle annuity.
When we were producing the data, my able assistant, Chris, thought he would punch in his postcode for the annuities and then he punched in his friend, who lives around the corner, literally a couple of streets away, and then we tested another postcode two more streets away.
Guess what – the rates were all different, yet the houses were just streets apart. In my ignor-ance, I had not realised that postcoding had gone down to street level – and indeed now seems to be influenced by your house – and not your health in the first instance. Is this fair and equitable? Not in my book.
This really does reinforce the need for ordinary people to engage in their retirement income planning to make sure they get the right deal. It obviously also means that advisers need to ensure that an effective retirement service is offered. For our part, we have in the last month reissued our draft retirement options report for IFAs – free download, and reissued our retirement planning questionnaire which contains our own approach to risk assessment.
The industry has gone too far and it is time to shine a light on postcode annuities or, as some call it, lifestyle annuities
On top of this, we have been investigating the non-advised sales route to providing retirement income options for the individual. A couple of points are quite clear from this work – apart from it being a viable option for the adviser firm. First, the process must be exceptional and second, the handover to an advice service is essential. Will this be the way to provide service to the mass UK retirement market?
Much of our activity is carried out with the support of product providers and aims to help the adviser market change and develop their model to meet the future market needs. The heads up for advisers is the level of innovation and change on the horizon. On top of RDR, and all the connotations of that, we now have HMRC changing the drawdown market and a set of product providers looking to provide real innovation in their propositions. The challenge is to understand it all and establish the answer to, So what does it mean for my business? The answer may not be simple to find but this is an important journey to go on.
The industry has gone too far and it is time to shine a light on post-code annuities or, as some call it, lifestyle annuities
Steve Lewis, Managing director, The Retirement Partnership