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12

Product innovation the biggest challenge for pension providers

Open-access content Monday 21st December 2015 — updated 9.19pm, Wednesday 6th May 2020

Bringing new products to the market has been identified as the biggest obstacle for life and pension providers, according to a pension software firm.

This represented the view of 63% respondents. Aquilaheywood said the finding was "not surprising" as it had seen "relatively little innovation so far", given recent pension reforms were introduced in a "remarkably short timeframe".

Based on 100 delegates who attended a pensions conference in London, organised by Marketforce, Aquilaheywood said more than half (53%) identified other challenges such as out-of-date computer systems and supporting omni-channel servicing. 

The firm said reforms such as pension freedoms and automatic enrolment, and the need to digitise current systems, added pressure to older technologies. 

"Add in the introduction of charge caps, new fund options and removal of active member discounts and commission, and it is easy to see why providers with multiple legacy systems have an enormous change cost to bear," it said. 

Respondents also believed savers with smaller pots, such as those under £250,000, would benefit most from pension freedoms.

The firm said: "For those with smaller pots, there is evidence already of demand for instant cash to pay off debt, make a significant lifestyle purchase or similar."

It argued that for slightly larger pots, savers who would have previously defaulted to an annuity now had "far greater options" to use their retirement income flexibly.

A significant proportion (77%) of respondents felt workplace defined contribution schemes should offer members a full range of options with pension freedoms, such as cash withdrawals, Uncrystallised Funds Pension Lump Sum and drawdown. 

Respondents also suggested a wide range of products such as pension dashboards and blended drawdown and annuity solutions.

The firm said: "To be successful, many will need to invest in new retirement platform technology. This means a solution that spans worksite and individual customers, pensions, ISAs and other savings wrappers. One that manages the whole range of income products in retirement - annuities, drawdown, newly-emerging hybrids, third-way guaranteed products, and even equity release."

This article appeared in our December 2015 issue of The Actuary.
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