Annuities and modern retirement planning

In this series of videos, Emma Byron, Managing Director for Retirement Income, Andrew Newman, Chief Operating Officer and Jon Scannell, Distribution Director outline:

  • Why we're so positive about the future of the annuity market.
  • What’s changed when customers talk about retirement.
  • The importance of annuities as part of long-term retirement planning.
  • How we plan to support advisers to talk about the benefits of annuities.

You can watch the full recording or one topic at a time in the smaller versions below.

What’s fuelling the post-pension freedoms recovery of the annuity market?

Emma Byron talks about the three main drivers of market growth and why we're positive about the future of the annuity market.

What’s fuelling the post-pension freedoms recovery of the annuity market? video

Transcript: What’s fuelling the post-pension freedoms recovery of the annuity market?

Emma Byron: Well at Legal & General last year so the year to December 2017, we saw a 78% increase in our individual annuity sales. Now that wasn't all related to market growth, a lot of our, a lot of companies legacy in the market clearly helped ourselves. But we still were really positive about the future growth of the market and that’s really borne out as well in a lot of the industry stats we see so for example the ABI project steady growth going into 2020. But taking sort of a step back from the high level and thinking about what drives that growth, now absolutely if there's more people reaching retirement that's going to help us.

If they've got more savings in particularly in defined contribution pension schemes that again is going to be a driver of growth in the annuity market, and then if the economic conditions are right that it means that you know people will find annuity products more attractive than perhaps they do today, then again that's going to help to drive the growth.

Changes to our customer conversations post-pension freedoms

Since pension freedoms were introduced, our customer conversations have changed. But despite some confusion about the additional options in retirement, it’s very common for customers to be certain they require a secure income.

Changes to our customer conversations post-pension freedoms video

Transcript: Changes to our customer conversations post-pension freedoms

Andrew Newman: In general terms the conversations have become much longer due to the additional messaging we now need to include in every call.

In some cases customers are confused about the additional options introduced post pension freedom, while others have fully embraced the notion of shopping around before they ever pick up the phone to us, and in those cases the conversations are much shorter and the customers are much better informed.

It is very common for customers when they come on the phone to us though already to be certain that what they're after is a secure income in retirement.

Annuities and the intergenerational contract

Investing in the long-term growth of the UK economy is at the heart of our business ethos. Emma Byron explains how both retirees and younger savers benefit from the intergenerational contract.

Annuities and the intergenerational contract video

Transcript: Annuities and the intergenerational contract

Emma Byron: If we just look at the business lines that we have as a group we clearly have a growing workplace savings book, and also a growing personal investing book.So within those businesses we’re really helping customers to save throughout their working life, so it makes sense to us that we would then also want to help them to get great financial outcomes in their retiring lives.

So I think that's where the retirement income business and more broadly our retail retirement business fits in, we've helped them you know effectively through the accumulation phase of course we want to help them in the de-accumulation phase. But stepping away from the sort of specific product lines, business lines and thinking more holistically about L&G as a group.

We have a really strong social purpose and real commitment to investing in the long term growth of the UK economy and that’s something if you work in L&G you know you really sort of feel that it's as passionate and across the business people are really enthused by. And I think taking annuities they really sort of epitomise the intergenerational contract that exists so they thereby you're taking sort of retirees money you're investing that in sort of infrastructure, homes, you know offices and so on which in turn helps to fuel the growth of the UK economy for the benefit of the younger generation, and also retirees.

And it’s something certainly that I feel really proud of when I look the investments were making in sort of regenerating cities like Cardiff, Leeds you know building better student homes and so on that you can feel really proud of that that's something that L&G is quite unique in doing to the extent that we do, and that’s hopefully something our customers can feel really proud about as well because it's their money that we're investing to do that.

Do annuities have a place in retirement planning?

Retirement has changed, and so has our approach to retirement planning. Providers and advisers need to engage with customers, to find a combination of products that meet their needs throughout their retirement journey.

Do annuities have a place in retirement planning? video

Transcript: Do annuities have a place in retirement planning?

Emma Byron: Yeah I mean definitely retirement it’s different today to how it would have looked 10, 20, 30 years ago.You know there's not a question of sort of people retiring putting their feet up and you know and that's sort of it. People lead really active retirements, a lot of people continue to work in some form during their retirement, and you'll be looking after grandchildren you know, you may go off and lots of cruises and adventures in the early parts of their retirement.

And their retirement last as you say a lot longer so the person of 65 starting their retirement journey is going to look really different to someone who’s 85, and their needs are therefore going to be incredibly different.

So I think what we need to do as providers is sort of move away a little bit from specifics of products you know annuities drawdown and so on and really think about and start with what is the customers need and how is that going to evolve through retirement.

It's not going to be a once and done decision the day you, you know you give it your retirement notice that work and that's sort of one products could have fit your needs for the rest of your life. I think we as providers and advisers need to be continually engaging with customers throughout their retirement journey, and finding the combination of products most likely which will include annuities that really meet those customers’ needs and reassessing that on an ongoing basis, to ensure that as the customers life changes in that long period of time that they really got the products that fit with what they need.

Engaging with advisers to rethink annuities

Over the next 12 months, we'll be talking to advisers about the benefits of annuities, finding out what customers want, and responding to the feedback with an improved service.

Engaging with advisers to rethink annuities video

Transcript: Engaging with advisers to rethink annuities

Emma Byron: We’ve got lots of, lots of plans you know the firstly we're just going to be out there talking to them a lot more making sure we're listening to them, understanding you know both from you know what are they hearing for their customers but also are we providing them with the service that they want and making sure we make those changes quickly in response to any feedback that they have for us.

So we just have a lot more people, they’ll be seeing a lot more L&G people knocking on their door, and hopefully that will mean that we automatically get the feedback that we're looking for and ability to change.

I think the other thing I touched on a moment ago is just making sure we're really being clear about what the benefits are, I'm very keen that we don't we don't shy away from the bad press that annuities have had and that we're very clear with people about what the pros and cons are.

They're not, annuities aren't going to be for everyone they might be you know a partial part of someone’s retirement and might choose a combination, but they're not going to be for everyone so let's not you know pretend that they are and that they are the answer to everyone's retirement problems.

So I think making sure we are able to really compare and contrast the products that are there and help advisers really hone in on what the benefits are of the products that are on offer it is another big, big focus of our attention.

Developing the distribution team to improve adviser support

Jon Scannell shares our plans to make it easier for advisers to work with us, by developing the distribution team and improving the digital experience.

Developing the distribution team to improve adviser support video

Transcript: Developing the distribution team to improve adviser support

Jon Scannell: We’re busy building the distribution team so they're going to have a point of contact now whether that point of contact is over the telephone or face-to-face, they're going to have somebody that they can talk to from a sales perspective within Legal & General.

I guess what we're also doing is starting to thinking and talk about the whole digital journey and what that looks like, so you know that’s certainly part of the agenda that I’m working through currently.

And I guess the first part of that will be an IFA case tracker, so what we've been told by the market is you know enable us to make fewer phone calls, but give us the tools to be able to talk to Legal & General in an automated way.

So there’s various sorts of aspects that we’re looking at there, and then I guess we need to start having a presence so we're planning a whole series of breakfast briefing seminars and workshops to start to talk to the IFA community about what we're about, what our stance is within the retirement space and actually some innovation.

You know what are the challenges within the annuity sector, flexibility, just starting to think about how we manage that message and push forward over the next few years.

Full video:

Legal & General Retail Retirement - Lifetime Annuities video

Transcript: Legal & General Retail Retirement - Lifetime Annuities

Presenter: I'm here today to talk to Emma Byron, Managing Director of Legal & General’s retirement income business to find out about the organisation's plans and why lifetime annuities still have an important role to play.

Emma back in 2015 when UK annuity sales felt the full force of post pensions freedoms, few would have placed any long-term bets on how the market would fare, but barely three years later the market is beginning to recover. What do you think is fueling its recovery?

Emma Byron: Well at Legal & General last year so the year to December 2017, we saw a 78% increase in our individual annuity sales. Now that wasn't all related to market growth, a lot of our, a lot of companies legacy in the market clearly helped ourselves. But we still were really positive about the future growth of the market and that’s really borne out as well in a lot of the industry stats we see so for example the ABI project steady growth going into 2020. But taking sort of a step back from the high level and thinking about what drives that growth, now absolutely if there's more people reaching retirement that's going to help us.

If they've got more savings in particularly in defined contribution pension schemes that again is going to be a driver of growth in the annuity market, and then if the economic conditions are right that it means that you know people will find annuity products more attractive than perhaps they do today, then again that's going to help to drive the growth.

On screen text: How have the conversions that our customer services team have with individuals changed post-pension freedoms?

Andrew Newman: In general terms the conversations have become much longer due to the additional messaging we now need to include in every call.

In some cases customers are confused about the additional options introduced post pension freedom, while others have fully embraced the notion of shopping around before they ever pick up the phone to us, and in those cases the conversations are much shorter and the customers are much better informed. It is very common for customers when they come on the phone to us though already to be certain that what they're after is a secure income in retirement.

Presenter: These are clear strategic reasons for championing the annuity market once again, but Chris Knight Chief Executive of Legal & General’s Retail Retirement division has also spoken about the intergenerational contract with pensions and the need to get out a positive message to the customers. How does your commitment to the annuities market fit in with this?

Emma Byron: So perhaps to take I'll take it in two parts, if we just look at the business lines that we have as a group we clearly have a growing workplace savings book, and also a growing personal investing book.

So within those businesses we’re really helping customers to save throughout their working life, so it makes sense to us that we would then also want to help them to get great financial outcomes in their retiring lives.

So I think that's where the retirement income business and more broadly our retail retirement business fits in, we've helped them you know effectively through the accumulation phase of course we want to help them in the de-accumulation phase. But stepping away from the sort of specific product lines, business lines and thinking more holistically about L&G as a group.

We have a really strong social purpose and real commitment to investing in the long term growth of the UK economy and that’s something if you work in L&G you know you really sort of feel that it's as passionate and across the business people are really enthused by. And I think taking annuities they really sort of epitomise the intergenerational contract that exists so they thereby you're taking sort of retirees money you're investing that in sort of infrastructure, homes, you know offices and so on which in turn helps to fuel the growth of the UK economy for the benefit of the younger generation, and also retirees.

And it’s something certainly that I feel really proud of when I look the investments were making in sort of regenerating cities like Cardiff, Leeds you know building better student homes and so on that you can feel really proud of that that's something that L&G is quite unique in doing to the extent that we do, and that’s hopefully something our customers can feel really proud about as well because it's their money that we're investing to do that.

Presenter: These days retirement can last 20 years or more is there a place for annuities in retirement planning?

Emma Byron: Yeah I mean definitely retirement it’s different today to how it would have looked 10, 20, 30 years ago.

You know there's not a question of sort of people retiring putting their feet up and you know and that's sort of it. People lead really active retirements, a lot of people continue to work in some form during their retirement, and you'll be looking after grandchildren you know, you may go off and lots of cruises and adventures in the early parts of their retirement.

And their retirement last as you say a lot longer so the person of 65 starting their retirement journey is going to look really different to someone who’s 85, and their needs are therefore going to be incredibly different.

So I think what we need to do as providers is sort of move away a little bit from specifics of products you know annuities drawdown and so on and really think about and start with what is the customers need and how is that going to evolve through retirement.

It's not going to be a once and done decision the day you, you know you give it your retirement notice that work and that's sort of one products could have fit your needs for the rest of your life. I think we as providers and advisers need to be continually engaging with customers throughout their retirement journey, and finding the combination of products most likely which will include annuities that really meet those customers’ needs and reassessing that on an ongoing basis, to ensure that as the customers life changes in that long period of time that they really got the products that fit with what they need.

Presenter: So what sort of support can advisers expect to see throughout the year?

Emma Byron: We’ve got lots of, lots of plans you know the firstly we're just going to be out there talking to them a lot more making sure we're listening to them, understanding you know both from you know what are they hearing for their customers but also are we providing them with the service that they want and making sure we make those changes quickly in response to any feedback that they have for us.

So we just have a lot more people, they’ll be seeing a lot more L&G people knocking on their door, and hopefully that will mean that we automatically get the feedback that we're looking for and ability to change.

I think the other thing I touched on a moment ago is just making sure we're really being clear about what the benefits are, I'm very keen that we don't we don't shy away from the bad press that annuities have had and that we're very clear with people about what the pros and cons are.

They're not, annuities aren't going to be for everyone they might be you know a partial part of someone’s retirement and might choose a combination, but they're not going to be for everyone so let's not you know pretend that they are and that they are the answer to everyone's retirement problems.

So I think making sure we are able to really compare and contrast the products that are there and help advisers really hone in on what the benefits are of the products that are on offer it is another big, big focus of our attention.

On screen text: What sort of support can advisers expect from our distribution team this year?

Jon Scannell: We’re busy building the distribution team so they're going to have a point of contact now whether that point of contact is over the telephone or face-to-face, they're going to have somebody that they can talk to from a sales perspective within Legal & General.

I guess what we're also doing is starting to thinking and talk about the whole digital journey and what that looks like, so you know that’s certainly part of the agenda that I’m working through currently.

And I guess the first part of that will be an IFA case tracker, so what we've been told by the market is you know enable us to make fewer phone calls, but give us the tools to be able to talk to Legal & General in an automated way.

So there’s various sorts of aspects that we’re looking at there, and then I guess we need to start having a presence so we're planning a whole series of breakfast briefing seminars and workshops to start to talk to the IFA community about what we're about, what our stance is within the retirement space and actually some innovation.

You know what are the challenges within the annuity sector, flexibility, just starting to think about how we manage that message and push forward over the next few years.