Innovation and retirement planning for cautious, middle and mass market clients

Transcription

1 Innovation and retirement planning for cautious, middle and mass market clients Kevan Ramanauckis Retirement Income Specialist Information for adviser use only

2 Learning objectives for today Identify the challenges facing cautious retiring clients and their advisers Demonstrate how a cautious retiring client can remain invested longer while mitigating risks Describe the type of clients using new innovation to secure their own retirement in uncertain times Retirement Advantage Information for adviser use only 2

3 Challenges: converting clients assets into income Pension Investments i.e. Unit trusts Income or Legacy Savings i.e. ISA Property What about your Cautious, Middle and Mass market clients? 4 Retirement Advantage Information for adviser use only

4 Investment concerns: for the cautious investor Low Interest Rates Asset Price Bubble Falling Pound Rising Inflation Investment Volatility Political Uncertainty Retirement Advantage Information for adviser use only 4

5 The Big 5 issues in retirement Having enough money to do the things I want to do The cost of living Health issues Losing a partner or spouse Leaving a legacy Retirement Advantage Information is for adviser use only Source: YouGov research for Retirement Advantage, Sentiment Index August

6 Certainty and Flexibility: in uncertain and volatile times Certainty Capital security Income certainty Continued income for dependents Legacy for loved ones Flexibility Growth potential Access to cash Flexible when my circumstances change Flexible when markets change Retirement Advantage Information for adviser use only 6

7 Cautious clients: retirement risks they will face What risks do your clients need to absorb, avoid or insure? Known risks facing retirement Longevity risk (this is not just a risk, but a risk multiplier for all the other 9 risks) Mortality risk Market risk Withdrawal rate risk (sustainable income) Sequence of returns risk Inflation risk Unknown risks facing retirement Divorce Market crash Swindled or fraud Lost or stolen assets Bank of mum and dad Future legislation Deflation risk Taxation risk Regulatory risk Long-term care risk (including assisted at home and long-term residential home risk) Retirement Advantage Information is for adviser use only 7

8 How long will I live: have it documented on file Retirement Advantage Information for adviser use only Source: ONS website or link via 8

9 Source: Morningstar research 1 st May 2016 lower end of range now starts towards 2.5% or 3% and not the previous 4%, as we move into less generous capital market returns initial safe withdrawal has been calculated in the range of 70% to 99% success, not 50% probability Retirement Advantage Information for adviser use only 9

10 Inflation risk: is it real? Retirement Advantage Information for adviser use only 10

11 How do we budget: in retirement? As we age our expenditure needs will change an example Active Passive Assisted / Care Clothing Bank of Mum & Dad Entertainment Home repairs Insurance Car costs Food Holidays Utility bills Bank of Mum & Dad Care Home repairs Holidays Insurance Clothing Public Transport Entertainment Food Utility bills Holidays Entertainment Clothing Insurance Home alterations Food Bank of Mum & Dad Care Utility bills Retirement Advantage Information for adviser use only

12 Everyone's retirement journey will be different Drawdown Flexibility State Pension Additional Guaranteed Income for life Active Passive Assisted / Care Retirement Advantage Information for adviser use only 12

13 Legislation creates innovation Meeting certainty with flexibility Information approved for adviser use only

14 Changed retirement taxation: created innovation Tax control is the key Income Death Return of fund Value protection Guarantee period Lifetime Annuity Drawdown Annuity under drawdown rules Marginal rate, unless death before age 75 Before 75 n/a No tax No tax After 75 n/a 45%* Marginal rate Marginal rate Before 75 No tax n/a n/a After 75 Tax Control n/a n/a Before 75 n/a No tax No tax After 75 n/a **Tax Control **Tax Control * 45% tax charge, marginal rate confirmed in budget July 2015 from April 2016 ** Annuity death benefits are paid into Nil Income Successor Drawdown same as IDD plan. Tax position is Nil or Marginal rate depending on income taken Retirement Advantage Information for adviser use only

15 New annuity death benefits Insuring your pension savings invested 50,000 2,600 2,500 2, ,300 2, ,100 2, ,900 No guarantee 10 year guarantee 20 year guarantee 25 year guarantee 30 year guarantee 100% moneyback Source: Based on 50,000 pension pot in TRA Annuity; Healthy Male, 65 yr old, Retirement Advantage, 03/08/16 Retirement Advantage Information is for adviser use only 15

16 Leaving a legacy for loved ones Total amount paid out invested 50,000 70,000 60,000 50,000 40,000 Die after 1 year Die after 15 years 30,000 20,000 10, ,510 37,650 No guarantee 24,700 37, year guarantee 46, year guarantee 56, year guarantee 66, year guarantee 49, % moneyback Source: Based on 50,000 pension pot in TRA Annuity; Healthy 65 yr old, Retirement Advantage 25/11/16. Examples only. Retirement Advantage Information is for adviser use only 16

17 The Retirement Account Innovation New Pension Freedom Drawdown Information approved for adviser use only

18 How a hybrid solution works: for a cautious client Drawdown fund and income Guaranteed flexible income Aggregated income Cash Account - Decide on distribution Pay out income Retain/reinvest Pay agreed balance to client bank account Pay any additional tax due Retirement Advantage Information for adviser use only 18

19 What is The Retirement Account? Flexi-access drawdown wrapper Drawdown Account Drawdown with simplified investment choice Cash account for holding funds when not immediately needed Can be used as a nest egg or for providing regular or ad-hoc income Guaranteed Income An annuity written under drawdown rules Guaranteed income for life with escalating income and death benefit options 30 year guarantees and value protection Provides the security of a lifetime annuity but under drawdown rules One illustration, one application, suitability and annual review report Retirement Advantage Information is for adviser use only 19

20 External Investment governance: peace of mind Square Mile Investment commentary on funds Up to date information on fund strategy Understanding of fund objectives and how it meets them Retirement Advantage Understanding of customer needs in retirement Has the strongest commitment to governance, compared to any other provider we partner with Richard Romer-Lee, Square Mile Consistent and regular reviews of funds ensuring they continue to meet their stated objectives Minutes published on our website Retirement Advantage Information for adviser use only 20

21 The Retirement Account Fund Range Offering a choice of levels of risk dependent on the clients circumstances Cautious Balanced Adventurous Index-tracking funds Cautious Index Portfolio 0.25% OCF Balanced Index Portfolio 0.25% OCF Adventurous Index Portfolio 0.25% OCF Peer aware Henderson Cautious Managed 0.82% OCF AXA Framlington Balanced Managed 0.80% OCF Threadneedle Global Equity 1.18% OCF Outcome orientated Standard Life GARS 0.94% OCF Jupiter Merlin Balanced 1.74% OCF Jupiter Merlin Growth 1.79% OCF Income bias Invesco Perpetual Distribution 1.12% OCF AXA Distribution 0.86% OCF Henderson Global Equity 0.95% OCF Protected Protected Index Portfolio 0.86% OCF Cash Insight Liquidity 0.10% OCF Investec MAP 1.29% OCF Retirement Advantage Information for adviser use only 21

22 The Retirement Account: all charges Annuity pricing There is not likely to be any significant difference in the annuity rate being offered between a Retirement Account annuity and one of our stand-alone products. Product charge Initial product charge of 150 Pension Drawdown charge Annual charge (deducted monthly) determined by tiered scale based on amount of drawdown funds Size of Drawdown fund Charge Tier 1 funds up to 25, % Tier 2 funds between 25,000 and 75, % Tier 3 funds between 75,000 and 150, % Tier 4 funds above 150, % Fund management charges and adviser fees Retirement Advantage Information for adviser use only 22

23 The Retirement Account: charges for income drawdown Pension Drawdown charge Size of Drawdown fund Charge 100, % 150, % 250, % 500, % Plus fund management charges and adviser fees Retirement Advantage Information for adviser use only 23

24 The Retirement Account: a drawdown for cautious clients Designed with flexibility to manage capacity for loss Drawdown Annuity Absorb Retirement Risk Full Drawdown Drawdown Annuity Drawdown Annuity Insure Retirement Risk Blend DD with Guaranteed Income Avoid Retirement Risk Full Guaranteed Income Retirement Advantage Information is for adviser use only 24

25 The Retirement Account Innovation Full tax control alive or dead Information approved for adviser use only

26 The Retirement Account: bridging the state pension Case study: Jeremy age 60, 100,000 DD pension fund, working part-time Retirement Advantage Information is for adviser use only 26

27 The Retirement Account: 5 years later Jeremy now 65 years, takes state pension, does not need the income The Retirement Account: another 5 years later Jeremy now 70 years, needs more income (pays carer and pays the bills) Retirement Advantage Information is for adviser use only 27

28 Retirement Account: death benefit options Pension Drawdown Remaining fund paid as income (via beneficiaries own retirement account) Remaining fund paid as lump sum (at our discretion taking into account any expression of wish) Guaranteed Annuity No death benefits Dependant s pension 50%, 66%, 75% or 100% Guarantee income periods 1 30 years* Remaining guarantee income can be commuted to lump sum Money back guarantee up to 100%* *one or other can be selected, not both together Each tranche of GA can have it s own choices Retirement Advantage Information is for adviser use only 28

29 Pass funds to family: control over tax Drawdown Account (remaining funds) Guaranteed Lifetime Annuity with death benefits (Money-back option or up to 30 yr guarantee) Both annuity and drawdown elements pass to successor drawdown account on death Successor Drawdown Account Lump sum, income and/or buy annuity Retirement Advantage Information is for adviser use only 29

30 Tax controlled death benefits: annuity Peter aged 65 invested 100,000 into an annuity written under drawdown rules. 100% of the money was invested in the new DD annuity with 30 year guarantee period paying 4,169 a year. He dies after 20 years aged 85. He leaves his benefits 50% to his daughter Michelle (age 50) and 50% to his daughter Jasmine a teacher (age 47) Peter s DD Annuity Account Total Income paid 83,380 Death confirmed Michelle s Beneficiary DD Account Yearly income of 2, for next 10 years ( 20,845) Jasmine s Beneficiary DD Account Reinvest income or commute lump sum 18,350 Each beneficiary is offered: (1) Ongoing income guarantee for next 10 years or (2) Commuted value paid to cash account Retirement Account annuity illustration dated 22/7/16 Ref RA Retirement Advantage Information is for adviser use only 30

31 The Retirement Account Suits clients who are..cautious, the pension fund is the primary asset for retirement and or there are capacity for loss concerns Information approved for adviser use only

32 The Retirement Account: who is the ideal client? Clients in existing Drawdown plans Guaranteed Drawdown pensions Final salary transfers Fixed Term Annuities Capped and Flexible Cautious with income Unit linked guaranteed drawdown pensions Taking benefits Maturing plans 70 plus Poor Health / lifestyle Low capacity for loss Taking income Poor health Preserving capital Wealth over income Poor health Single, divorced, widowed Heavily in debt Rates not recovered Protecting capital Flexible income Values flexibility and certainty Values certainty and flexibility Values flexibility with certainty Values flexibility over certainty Retirement Advantage Information for adviser use only 32

33 Why are people transferring final salary pensions? Right reason, right time & right solution Single scheme members i.e. single, divorced widow(er) Poor death benefits for deferred members Poor health, smokes or degree of illness Desire for income flexibility and control Scheme likely to enter Pension Protection Fund (PPF) assessment period Multiple final salary benefits Retirement Advantage Information is for adviser use only 33

34 Example of final salary transfer Male 58, divorced, 2 children, moderate health issues with final salary scheme, transfer value 480,000 Benefits from DB scheme Tax-free lump sum - 70,650 Pension - 10,711 50% spouses benefit, escalating at LPI Transfer to Blended solution Tax-free lump sum - 112,500 Pension - 10,711 (using 276,000 of fund) 100% money-back guarantee, no escalation. Pension Drawdown - 91,500 Figures based as at 13/10/2016. Illustration reference: RA before 150 TRA Product Charge For DB transfers, outcome depends on the individual circumstances of each client Retirement Advantage Information for adviser use only 34

35 Summary: The Retirement Account an award winning drawdown for cautious clients Drawdown taxadvantaged wrapper Sleep-easy flexi access drawdown Guaranteed annuity Winner: Pensions innovation awards Moneywise ILP Moneyfacts 80% Protected Index Portfolio Retirement Advantage Information for adviser use only 35

36 Pay the bills, enjoy retirement BUT never run out of money! Retirement Advantage Information for adviser use only 36

37 Learning objectives for today Identify the challenges facing cautious retiring clients and their advisers Demonstrate how a cautious retiring client can remain invested longer while mitigating risks Describe the type of clients using new innovation to secure their own retirement in uncertain times Retirement Advantage Information for adviser use only 37

38 Thank you Any questions? Telephone calls may be recorded for training and quality monitoring purposes. Retirement Advantage is a trading name of MGM Advantage Life Limited. Registered no Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Retirement Advantage and the Retirement Advantage logo are trademarks of MGM Advantage Holdings Limited. Registered in England and Wales. Registered office MGM House, Heene Road, Worthing, West Sussex, BN11 3AT. 110 Cannon Street London EC4N 6EU Existing business and quotes New enquires retirementadvantage.com 38