‘Expect the unexpected? Retirement planning in uncertain times’ For advisers only – Not for use with retail customers
Learning Objectives To be able to demonstrate an understanding of: Planning The suitability and implications from regulatory Retirement challenges for Journeys and drawdown advisers Pension Freedom in uncertain ‘cohort’ research markets
Important information This presentation is for adviser use only and not for retail customers, and contains some forward thinking statements which should not be taken as fact. Information given is based on our current understanding, as at 01-09-2017, of current taxation, legislation and HMRC practice, all of which are liable to change and subject to an individual’s own circumstances. Terms and conditions of products are available on request. The level of charges may change in the future. For webex presentations, the event may be recorded for training purposes. No reproduction, copy, transmission or amendment of this presentation may be made without the written permission from Prudential. Prudential" is a trading name of The Prudential Assurance Company Limited. This name is also used by other companies within the Prudential Group. The Prudential Assurance Company Limited is registered in England and Wales. Registered office at Laurence Pountney Hill, London EC4R 0HH. Registered number 15454. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The value of an investment may go down as well as up. Your clients may get back less than they have invested. This presentation contains past performance information which is not a reliable indicator of future performance. Investments can go down as well as up. Clients may not get back what they put in. Any examples included are designed to represent a typical situation and are not related to any particular individual. They do not recommend that course of action.
Pension freedoms… Expectation and reality?
DC ‘ Actioners – The First Cohort ’ 400,000 £50bn Not Relatively spending affluent splurge! Annuity Other ID / Cash pensions DC wealth Access to above SIPP or ID average Source PLSA ‘Pension Freedoms – No more normal’ Jan 16
DC ‘ Investigators – The second wave?’ 1.75m £164bn Started Some to deferral explore possible options Cash and Risk ID exposure popular Limited DB Limited DC/Savings ID reliant experience Source PLSA ‘Pension Freedoms – No more normal’ Jan 16
Retirement Journeys
Retirement Journeys…. Precautionary Desire for legacy saving? LTC? bequest Core vs Under-consumption discretionary as default? income Financial health Health concerns check at 70+? Underestimation of Flexibility then life expectancy security of income Source ILC Understanding Retirement Journeys Nov 2015
Consumption by consumer segment Golden decade Source ILC Understanding Retirement Journeys Nov 2015
Mapping the client retirement journey… Starting income Fund Value at end of year £18,192 Income (£) 60 75 91 Client Age at start of year This example represents a typical situation. It is not related to any particular individual. It does not recommend that course of action. Source: Prudential retirement modeller
Mapping the client retirement journey… Starting income Fund Value at end of year £24,852 Income (£) State Pension 60 75 91 Client Age at start of year This example represents a typical situation. It is not related to any particular individual. It does not recommend that course of action. Source: Prudential retirement modeller
Suitability
FCA -Recent Updates… ‘ • Update on Positive Compliance 2014 ‘ The Story Of Advice ’ • Advice Beginning, Middle and End •Transfers Including in particular circumstances… Transfers Round 1 • Investment considerations, critical yields • Responsibilities, Insistent clients and overseas plans Other Aspects • COBs starting position for transfers, Transfers Round 2 • Personal recommendations, PTS implications CP 17/16 • Reconfiguration of TVAS • Appropriate Pension Transfer Analysis TVAS • Transfer Value Comparator Source: FCA
Suitability overview – Rory Percival?’ Research and due diligence • Understanding of key Risks and benefits TR16/1 • Providers-Costs/Financial Strength? • Platforms/‘Status Quo bias’ /Periodic reviews Defined Benefit transfers • COBS 19 as default position • TVA /Critical yields • Aims and objectives vs ‘behavioural biases’ • Life expectancy/Cash-flow modelling/SWR Other aspects • Insistent clients • Suitability ‘Colour and detail’ • FCA & FOS-Perceptions • Adviser charging. Paradigm Support Material…
Sustainability in uncertain times?
Unexpected outcomes…? Equity Solution… Drawdown here? Percentage growth or Drawdown here? loss DB Transfer here? Annual review here! Annual review here! Annual review here! The graph shows the FTSE100 Index from 14 December 2006 to 13 December 2016 . Source: FE Analytics
Possible strategies…? Draw from cash…? Natural income from fund…? Insurance/guarantees…? Smoothing…? Safe withdrawal rate…? Time the market…’buckets’?
PruFund Growth Vs Sectors (5% Income) Source of performance data: Financial Express (FE). Please remember that past performance is not a reliable indicator of future performance. The figures are intended only to demonstrate performance history of the fund over the period shown and include a representative fund charge of 0.65% pa. They take no account of product or advice charges. Some, if not all, of the funds comprising the ABI sector averages are net of fund charges. The application of charges may impact the overall performance. The value of your client’s investment can go down as well as up and the amount your client gets back may be less than they put in . Performance is shown on a bid to bid price basis
Important information for PruFund The Expected Growth Rate (EGR) is the current annualised rate which will be applied daily to increase the unit price of the fund. They are set quarterly having regard to the expected long-term investment return on the assets of the fund; they are therefore subject to change for new and existing policyholders Unit Price Adjustments (UPAs) can be made in the future, which will have the effect of increasing or decreasing a client’s overall return The PruFund range of funds are multi asset arrangements and as such should be regarded as a medium to long term investment. All PruFunds are invested in the With Profit Fund
Learning Objectives To be able to demonstrate an understanding of: Planning The suitability and implications from regulatory Retirement challenges for Journeys and drawdown advisers Pension Freedom in uncertain ‘cohort’ research markets
Thank you for your time If you would like to give us feedback directly or request information not covered elsewhere please e mail us at speakernotes@prudential.co.uk
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