People need a lifeplan, not just a pension
At Standard Life we only participate in a market if we believe we’re bringing something special to it. Recently we’ve been researching the individual pensions space in some depth and are extending our proposition to put you and your clients at the heart of it.
Everything about our new active money lifeplan – from the name on down – is built on consumer and adviser insight. It comprises a new simple personal pension, our existing active money SIPP and a specialist proposition aimed at the top end of the retirement market. We’re phasing in the active money lifeplan during 2010, starting with the new active money personal pension. Squarely aimed at what we’re calling ‘the audience of the future’, it provides a compelling alternative to the personal pensions you’re used to recommending.
We’ve spent the last few months finding out what these consumers want, and the results have been fascinating. For example, we found that the word ‘pension’ is not Kryptonite to younger investors (‘younger’ means under 40 years old). They know a pension is a good way to save for retirement. There is, however, one word they do hate – retirement. It sounds dramatic, but retirement equates to old age and death for many in this group.
This group sees pensions as ‘far money’ – once they’ve put it in it’s gone, like a tax. By contrast, savings accounts are ‘near money’ that they can control. Collectively we have a real job to do to explain that although pension money is dedicated for a purpose, it’s as visible, changeable and real as the buy-to-let property they may have been eyeing up before everything went sideways. We also found that this group believes mortgages are more flexible than pensions, because you can overpay, underpay, add lump sums or take a payment holiday. Modern pensions offer this flexibility and more – but we’ve done a really bad job in telling people about it.
Despite some of the barriers, these consumers are well worth engaging with, for your business and ours. In a world where revenue depends on basis points of funds under management, it’s tempting to concentrate on those clients that have already amassed wealth. No doubt this is part of your strategy, but to assume there will be an ongoing supply of rich people coming your way in the future might be wishful thinking.
Why? The generation now in their late 20’s and 30’s will face new and real challenges as their parents spend their inheritance and they fund their children through higher education. Most importantly, the death of occupational pension schemes means this generation are missing out on arguably the most powerful force in wealth creation – the ‘accidental accrual’ of DB or DC pension assets. If assets are not being accrued then we all face starvation rations in the future.
The good news is that this generation are as interested in getting rich as any other – they just don’t know how to do it. They need practice getting rich, and a coach to help them. If they find a coach they trust, they’ll guard and protect that relationship for years to come – leading to a sustainable model for you.
We’ve designed our active money personal pension to fit the way this group want to live, save and take advice. It’s at its best when managed online, and in terms of investment choice, we’re including a simple range of low cost passive and managed funds with rebalancing. With no set-up or ongoing fees, add in your remuneration and you’re good to go.
Talking of remuneration, the audience of the future will pay for relevant advice that accepts their life will change in ways they can’t yet imagine. They don’t have large lump sums and won’t pay high up-front fees, which means some creativity may be required. But the IFA that constructs an appealing model for this group will be well rewarded in time. That’s why the active money personal pension allows you the flexibility of taking fees – including ad-hoc fees – through the product as well as using commission options.
And when the time is right, the active money personal pension easily turns into a full SIPP. Your client keeps their plan number and you can switch on self-investment flexibility or income drawdown with a single call or internet instruction. The audience of the future wants a pension that can change if their life goes in an unexpected direction. That’s why we call it the active money lifeplan.
For more information
We’re looking forward to telling you more about the active money lifeplan and our major new consumer campaign in 2010. For now, I’ll leave you with the thought that whatever customer group they’re in, people need a lifeplan, not just a pension. We hope to work with you to provide them with just that.