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120126 Tisa Itcs


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With all the current noise about the \'at retirement\' market - a recent presentation to TISA concentrating on the important bit - the consumer.

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120126 Tisa Itcs

  1. 1. I t’s the consumer, stupid ! 26 January 2012
  2. 2. It’s the consumer, stupid!
  3. 3. It’s the consumer, stupid!
  4. 4. It’s the consumer, stupid! <ul><li>Market is dysfunctional </li></ul><ul><li>Biggest issues </li></ul><ul><li>How we might tackle them </li></ul>
  5. 5. It’s the consumer, stupid!
  6. 6. DC shouldn’t be this hard <ul><ul><li>Only 4 questions </li></ul></ul><ul><ul><li>Should I join? </li></ul></ul><ul><ul><li>Where do I invest? </li></ul></ul><ul><ul><li>How much should I save? </li></ul></ul><ul><ul><li>How (and when) do I take my benefits? </li></ul></ul>
  7. 7. DC shouldn’t be this hard – however, <ul><ul><li>Critical </li></ul></ul><ul><ul><li>Complex </li></ul></ul><ul><ul><li>Urgent </li></ul></ul><ul><ul><li>Irreversible </li></ul></ul><ul><li>At retirement choices are: </li></ul>
  8. 8. Retirement – how it used to be Saving Income 18 65 75 <ul><li>One job </li></ul><ul><li>Risk with employer </li></ul><ul><li>No choices </li></ul><ul><li>Retirement – a single event </li></ul>
  9. 9. Retirement – how it is now De-risking glide path is part of ‘new’ retirement Annuity 2 Annuity 1 <ul><li>10+ jobs </li></ul><ul><li>Risk with consumer </li></ul><ul><li>Many choices </li></ul><ul><li>Retirement – a process </li></ul>18 65 75 55 85
  10. 10. Dislocation between accumulation and decumulation <ul><ul><li>Inert </li></ul></ul><ul><ul><li>Financially illiterate </li></ul></ul><ul><ul><li>Disengaged </li></ul></ul><ul><ul><li>Low wealth </li></ul></ul><ul><ul><li>80% of the market </li></ul></ul><ul><ul><li>Proactive </li></ul></ul><ul><ul><li>Sophisticated </li></ul></ul><ul><ul><li>Engaged </li></ul></ul><ul><ul><li>Wealthy </li></ul></ul><ul><ul><li>20% of the market </li></ul></ul><ul><ul><li>Typical individual is expected to be : </li></ul></ul><ul><ul><li>Saving </li></ul></ul><ul><ul><li>Income </li></ul></ul>
  11. 11. How do we overcome these issues? <ul><li>On the road to retirement: </li></ul><ul><ul><li>It’s not two products – it’s one </li></ul></ul><ul><ul><li>Getting the glide path right (for different groups) </li></ul></ul><ul><ul><li>Make sure SRDs are sensible </li></ul></ul><ul><ul><li>Aggregate small pots </li></ul></ul>
  12. 12. The big question – what’s everyone else doing?
  13. 13. Context Expected income Contributions Investment return
  14. 14. There’s no point getting the glide path right………. Men Women … .. If you’re aiming for the wrong destination. Selected retirement ages
  15. 15. Small pots <ul><ul><li>£5,276 median ‘pot’ </li></ul></ul><ul><ul><li>58% ‘dormant’ </li></ul></ul><ul><ul><li>80% still ‘dormant’ 3 years later </li></ul></ul><ul><ul><li>Aggregation vital </li></ul></ul>
  16. 16. How do we overcome these issues? <ul><ul><li>Smarter defaults </li></ul></ul><ul><ul><li>Educate </li></ul></ul><ul><ul><li>Advise </li></ul></ul><ul><ul><li>Steer </li></ul></ul><ul><li>At retirement: </li></ul>
  17. 17. What attributes of products do consumers like? <ul><ul><li>Simple to use and to understand </li></ul></ul><ul><ul><li>Reliable and predictable </li></ul></ul><ul><ul><li>Guaranteed </li></ul></ul><ul><ul><li>Durable - one off decision (fix and forget) </li></ul></ul><ul><ul><li>Sounds like an annuity to me </li></ul></ul>
  18. 18. Just buy this one! “ We looked at  137,787 TV reviews:  this is the  best TV under £650 .”
  19. 19. I t’s the consumer, stupid ! 26 January 2012