Covid 19 and the Life and Pensions Industry Approach to Retirement

In a series of articles examining how to help readers live a rich and fulfilling life in later years, the FT has examined whether Covid-19 will provide the impetus for people to engage with retirement. Certainly the pandemic has forced many people to change their outlook and reconsider their personal priorities while putting their financial health under the spotlight. This should certainly drive more engaging discussions with financial advisers, for those that can afford them.

However, Covid 19 also represents an opportunity for the industry as a whole to develop new solutions consumers will need to help them enjoy a more secure retirement. The UK is facing a significant savings gap; DC savings rates are less than half that needed to replicate the benefits of DB schemes; annuities will be unattractive for the foreseeable future given low interest rates; equity release remains a niche product, unsuitable for many. To date the industry has responded by pulling capital out of the individual retirement market and embracing drawdown, ensuring that individual carry the growing burden of navigating retirement.

Reversing this shift and developing new solutions that reduce the risk that consumers run out of money, allow them to release more equity from their home safely and protect their families is possible. This crisis will create more meaningful engagement with retirement, but to address the needs that arise market participants need to think through two key questions:

1. How can product manufacturers, advisers, and the regulator work closely together to build confidence in and momentum behind new solutions that better address consumer needs?

2. How do revenue models need to shift to bring the incentives up and down the value chain in line with evolving customer needs?