“I will look unto the hills” – for help with my DC pot!



As the days click by and Outlook starts filling up for April  2015, I ask myself what help is on its way for those without the means for a drawdown SIPP or the inclination to purchase an annuity.

The FCA are are concerned about “unadvised” drawdown products, Labour are intending to intervene in the market but despite my eyes scanning the hilltops (from whence cometh mine aid) I see precious little product development.

It is true that Alliance Bernstein have finally got their Retirement Bridge product over the line, it is a good start though it is hardly a pensions bank account.

Today Aegon are launching a tweak to its pre-retirement default glide-path as a nod to change. Other asset managers are deliberating.

Speaking to one senior insurance figure last week, I asked why there was so little action. In his opinion, the large insurers, who will be asked to do most of the heavy lifting are “waiting to see”.

As ever, they are looking to see what the smaller, nimbler players bring to market in terms of functionality and how it is priced.

This is a shame. It would be better if the large insurers were braver, however it is understandable that they are not. Their products sit within many of the existing solutions that are used by advisers, it is not helpful to advisers that low-cost alternatives are brought to market by the adviser’s so-called “partners”.

I have complained about these partnerships in the past, pointing out that the vertical integration of asset management product with an advisory service will lead to conflicts. Here is just such a conflict. As usual, it is the consumer who is losing out.

The second mover strategy being employed by the large insurers, would be more understandable if there was impetus among the smaller nimbler players to produce the new products. Unfortunately there is a significant capacity crunch which is preventing the development of appropriate product and service in this area.

The natural partners to bring these products to market are the Third Party Administrators, but they have other agendas. Many have been recently brought into the folds of the major aggregators, Capita and JLT. Those that remain independent are busy dealing with change in other areas of pensions.

In fact, the “nimble players” are as burdened with the legacy both of pensions and of unwieldy systems as the large insurers.

The scene is set for an external pensions administrator with capacity- perhaps European, perhaps from the States or even from Asia. So far, only Tata consulting have made a significant play to provide infrastructure into the UK, but I sense there will be others.

There is a gap in provision in the UK. For those already over 55 and those approaching that age, who have not purchased annuities and have unencumbered pots, there is too little choice. The market abhors a vacuum and will reform to provide an alternative.

In the meantime, the best bet for those with small pots and small advisory budgets is to sit tight.

Retirement planning does not need to be one and go, a wait and see attitude seems sensible to me. Keeping funds invested in existing pots awaiting the arrival of proper drawdown products (suitable for their needs) or -dare I say it- the arrival of CDC, may be the best bet for the prudent person.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to “I will look unto the hills” – for help with my DC pot!

  1. Duncan S says:

    I think that prudent person you refer to could have a long wait Henry – hopefully their prudence will provide something else to live on in the meantime, or perhaps just continue working and let the products evolve as they inevitably will.
    The Industry already has a capacity crunch induced by legislation, plus an over-loaded regulatory agenda, part of which is forcing these large insurers to write off huge sums in future profits, so can we really expect them to be more brave?! Talking of bravery it would require an extremely large dose of it for any foreign pension administrator to set up shop in this environment. More likely a firm from Bristol may just lead the way here, which may just provide the necessary impetus to get the pack chasing.

  2. As Duncan says, there could be a long wait and hopefully they will have enough resources in the meantime; but many won’t. For people whose only resource will be their DC pot there will be a lot of rocks and too many hard places. If they leave their pot in place after the age at which they *could* use it – not the age at which they plan to use it – then it will be taken into account as notional income for mean-tested benefits. That will drop the support that they can get from the state which will in turn, in all probability, force them to use it; losing any final bonuses and reducing the level of take anyway.

  3. Good points Henry. To flip around your analogy, remember in the cowboy movies the hills were where all the outlaws and bad guys were to be found! However I guess the FCA is a pretty tough Sheriff who would shoot first and ask questions later.

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