Don’t pander to pension populism! Zurich big-wig hits out at “freedoms”

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“I have no time for populism” , was the astonishing rebuttal of top Zurich Insurance shrink Stefan Kroepfl. Kroepfl, who is global head of life business analysis – is no lightweight, nor was the discussion that ensued at this Dutch pensions conference.

Kroepfl went on to passionately endorse the principle of annuitisation and the importance for ordinary people of converting pension savings into a wage for retirement.

The mood in a roomful of Europeans, me , Malcolm Goodwin of Aviva and Joseph Liu of L&G was strongly The concept of giving people unlimited freedom in exchange for healthy tax-breaks, did not sit easily with this audience.

There was considerable interest about incentivisation. Clearly pension are still being “sold” across Europe and the c-word (commission) was heard regularly. It was good to have a discussion on how Britain has effectively banished commission, not just by the RDR but more fundamentally through the nudge mechanism of auto-enrolment. The discussion around auto-enrolment focussed on distribution and it was interesting to hear delegates from Eastern European countries talking of moving to auto-enrolment for second pillar pensions.

The problems with selling insurance and the image of insurance salesmen was a theme of the afternoon and perhaps the most interesting discussion focussed around linking the premiums we pay for health related insurance products to our health. We are of course familiar with this in practice, through firms such as Vitality, but one question got to the heart of the matter

“are you doing this because you care about your customers and are mindful of your reputation or are you doing this because you want to sell more policies?”

the answer was of course “both” but this was tested by a second question

“So why don’t you promote physical and mental well-being to those to who you provide annuities and long-term savings products”.

This thorny question of commercialism and image is a crux for this conference. There is a pleasing bluntness about its expression, here is a title of a session today

“Boosting sales through innovative products that appeal your customer”

Getting paid for giving the customer what they want is of course what business is all about, but the crux is that this is populism in its most extreme guise.

George Osborne was paid handsomely for delivering the populist agenda of pension freedoms but I wonder just how easily these freedoms sit with the British public, their advisers or those who manage the platforms from which our retirement planning is to be delivered. We are either at the start, middle or end of a global stock market correction. It is hardly a crash but it has brought out a fresh wave of nervous statements from drawdown providers on the perils of over-generous drawdown targets.

At the same time, the Prudential Regulatory Authority’s technical consultation paper about lifetime mortgages has sent the share price of annuity and lifetime mortgage provider into a tailspin (having lost 60% this year, it is one of Europe’s worst performing stocks). The reason for the loss in confidence in the insurer is market perception that it will have to bolster its capital reserves to continue writing new guarantee business.

As Citywire’s Jack Gilbert pithily puts it

Four years after Osborne’s pension freedoms nearly killed off the annuity market, the government’s regulators are on the verge of dealing it another major blow

A middle way?

There has been precious little talk at this conference about collective provision and risk sharing. I tried to introduce the subject but my words fell on arid soil and all questions turned to my comments on auto-enrolment.

I sense no appetite for risk-sharing among the European insurers, but here I may be using a select group to ignore a wider problem. I will be hearing from Allianz in a few days in a private meeting they are arranging to explain how collective DC will be distributed in Germany.

Judging by the polarity of debate at this conference, a middle way is badly needed, not just in Britain but in Europe too.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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