AKG’s annual analysis of the with profits sector predicts that advisers should be prepared for a rise in enquiries from customers nearing retirement who are trying to track down old with profits policies, assess their performance, benefits and charges and consider their next move.
Matt Ward, Head of Communications at AKG, said:
“The pension freedoms changes have piqued the interest of customers approaching retirement, leading to a surge of enquiries for UK life offices, and a decent proportion of customers in this demographic are likely to have with profits exposure in pension and investment policies.”
“They may therefore be inclined to track down old policies, potentially impacted by life office M&A activity in recent times, in order to assess the performance and charging structure of their with profits fund and to gauge how accommodating the policy can be in terms of new pension flexibility. Any guarantees provided by a with profits policy will need to be given due consideration.”
AKG’s comprehensive 2015 UK Life Office With Profits Reports, a publication now in its 20th year, show that sales of single premium products increased by 8.4% to £4.1 billion in 2014, with Prudential dominating sales. Regular premium new business dropped 64% to £184 million in the same period.
The publication highlights the strength of some of the sector with 40% of funds increasing bonus rates in 2014 thanks in part to successful de-risking strategies which have freed capital by transferring blocks of annuities out of funds. Some with profits funds have also been able to increase equity investments, helping to make them potentially more attractive for investors.
Matt Ward added:
“In considering their approach to drawdown investment some customers may appreciate the chance to work with solutions which can smooth some of the bumps in the equity markets and furthermore seek to access guarantees. If with profits style solutions can move with the times and present themselves in a transparent manner there is an opportunity for them to attract renewed customer interest. Indeed with profits may need to be reinvented or rebranded in some way in order to distance the terminology from its perceived toxicity”.
