There are many considerations and questions that will arise from the recently announced £1.6bn merger of pensions providers Just Retirement and Partnership both from an adviser’s and its clients’ perspective.
From an adviser’s point of view, there could be a number of changes created by this partnership that I might, on the one hand, welcome – but on the other, be a little more concerned about.
It is first worth considering the reasons from my perspective of how the market has come to this merger. The removal of compulsory annuitisation has de facto caused the significant cut in both companies’ business.
But, the new flexibilities did not force people to change and one could reasonably argue that if their products were fit for purpose and valued, then demand should not suffer as dramatically as it has done.
Transparency of pricing and commission terms have always been an issue with advisers and, in a post-Retail Distribution Review world, with their clients; hopefully the merger and the events that have caused it will address this, as the public are keen to see that they are getting the best value for their money in all their retirement options.
Being able to compare annuities alongside other retirement options, such as drawdown, is very important.
The question of pricing
However, the potential reduction in competition in the enhanced annuity market, brought about by this merger, raises a number of questions and probably most importantly that of pricing.
While not a monopoly situation, if you ignore defined benefit (DB) de-risking, it does reduce consumer choice and, as we are all aware, in any market where there is reduced competition, the consumer generally loses out.
So it will be interesting to see what effect this merger will have on the pricing of future products. Indeed, also what will happen to the underwriting criteria and processes now that the two companies are joined.
I am sure a lot of things will become clearer over the coming months, but communication with advisers and existing clients will be key.
Clients need to be reassured through clear channels of communication that the transition is seamless and that there will be no negative impact on their existing annuity contracts or the way or timing in which they will be paid.
Equally, advisers need to receive clear notification about any changes to the business and reassurance that their clients will not be affected.
The announcement of reduction in staffing numbers also raises an issue of concern as it could have an effect on the personal relationships that customers or advisers have with the business.
On a positive note, bringing the two leading providers together could mean an acceleration of new product development and innovation, now that they are combining their expertise and claims data. Hopefully, we will see a concentration of effort on making sure that the product is indeed fit for purpose when looking at all the retirement options.
Finally, it’s my understanding that some of the new company’s equity release business is funded by its annuities’ business, therefore, it will certainly be interesting to see if this impacts. And on a side point, also to see the effect on the DB de-risking market.
Jamie Smith-Thompson is managing director at Portal Financial