Speaking at the Lipper Alpha Expert Forum 2015 this morning (12 November), Robin Stoakley, managing director and head of UK intermediary at Schroders said while significant, pension freedoms were “not a game-changer for independent, UK asset managers”.
The biggest issue, he said, was blanket de-risking as savers approached retirement.
When annuity purchase was compulsory, the approach made “perfect sense”, whereas with people living longer the approach will leave too many short-changed, he said.
“One in five people aged 30 today will live to 100 – that is 30, 35 years into retirement. If you put them into assets that are not going to provide an income they are not going to get what they need when they hit their late 70s and early 80s. But [as an industry] we are not yet providing people with the right balance for what they will need.”
Stoakley added the sector had done an “appalling job” at getting people to understand the importance of saving for retirement, also flagging the declining state aid and rising cost of care.
“There is a massive timebomb ticking and I think it will go off. There is a massive job to do and we’ve not been doing it terribly well so far.”
The panel agreed educating and engaging with consumers should drive the debate, resulting in more outcome-based solutions rather than performance-led fund selling.
BlackRock managing director and head of UK retail Tony Stenning said as conversations between the fund groups, policymakers, advisers and consumers evolved, greater consistency of language was needed.
“We know that 50% of the population don’t understand simple percentages, 60% are going into long-term savings, thanks to auto-enrolment, but one in two of the younger generation – the millennials – are not saving anything, but they recognise they need to. There is a big gap to fill and I think we face a tipping point in around 2035 when all this comes home to roost. A whole bunch of people are going to retire worse off than their previous generation.”
Kames Capital director of wholesale Steve Kenny said as product development was being driven by customer demand, he was reminded of his early career when managed solutions and with-profits were “all the rage”.
He said the industry felt reminiscent of the days of with-profits as ongoing market volatility and pension freedoms see investors gravitate to more defensive strategies.
“We have to deliver what our customers want – whether intermediary or institutional – and multi-asset is what the broader market is looking for. It feels like we’ve come full circle; they are looking to mitigate risk, don’t want to have to think about asset allocation, they want a blend of constituents that give them a smooth return – that suits a real raft of society – whether for a pension or for long-term savings,” he said.
