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Financial services needs to quickly learn the lessons of pension freedoms

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Financial services needs to quickly learn the lessons of pension freedoms
  • Advisers are busier than ever with the provision of retirement advice post-freedoms and expect most new business to come from at-retirement clients with funds of £100,000 to £250,000 in 2018/19.
  • Advisers’ main investment/planning concerns for clients at- or post-retirement are -investment volatility, running out of money and sequencing of investment return risk.
  • Advisers see service delivery standards, range of product/fund solutions, financial strength/sustainability and digital/online capability and functionality as the key requirements for providers to be successful in this market.
  • Just over half of advisers are satisfied with the level of innovation and response post-freedoms, but looking ahead advisers would like to see further development or improvement with drawdown products, guaranteed capital/income solutions and the cost of products/funds/portfolios in 2018/19.

The financial services industry needs to quickly learn the lessons of the first three years of pension freedoms and work collaboratively on key initiatives to help sustain the delivery of better retirement outcomes for customers, independent financial services consultancy AKG says.

AKG has now published its 2018 Pension Freedoms paper, entitled Grasping the nettle: Working together to achieve better retirement outcomes, which also highlights the need for further development of service and product solutions in 2019/20 and beyond.

Exclusive independent research for the paper, which is sponsored by Prudential and Standard Life, shows advisers have never been busier – 77% of advisers say they are spending more time and resources on the provision of retirement advice since the launch of pension freedoms.

In terms of new business expectations, most advisers (67%) feel that it will come from at-retirement clients with funds of £100,000 to £250,000, and 48% say at-retirement clients with more than £250,000.

Advisers’ main investment/planning concerns for their clients at- or post-retirement are investment volatility (48%), running out of money (45%) and sequencing of investment return risk (41%).

Advisers questioned for the paper say the key requirements for providers to be successful with advisers in the pensions/retirement market are service delivery standards (58%); range of product/fund solutions (54%); financial strength/sustainability (48%) and digital/online capability and functionality (45%).

Looking ahead with advisers, the main areas where they would most like to see further development or improvement in the pensions/retirement market during 2018/19, were drawdown products (46%), guaranteed capital/income solutions (31%) and the cost of products/funds/portfolios (29%).

Matt Ward, AKG: “Without exception, the pension freedoms changes caught people by surprise. The changes have also coincided with a wider period of regulatory and political change and challenge. So, what has been seen initially is three years of adjustment to the new freedoms with further work to be done in 2018/19 and beyond, to then really capitalise on it.”

“Companies across the market must continue to learn quickly from those customers experiencing the initial stages of pension freedoms, and adapt their propositions accordingly, to better target future business opportunities and to help people achieve positive outcomes.”

“But we have already seen that it won’t all be one-way traffic in terms of opportunities realised, and that there will be challenges and casualties along the way.”

“The key to successful manufacturing and distribution will be intrinsically linked to the key retirement planning considerations for customers. Companies must therefore take heed of the concerns and requirements of their prime audiences – financial advisers and the end customer.”

AKG carries out assessment of a broad range of companies across the financial services industry, including the monitoring of evolving business strategies, and has therefore been in a great position to watch the post-pension freedoms market unfold. AKG’s initial pension freedoms paper was issued in July 2015.

AKG felt that it was crucial to underpin thinking for the paper with original market research findings and so three complementary research exercises were carried out with adviser and consumer audiences to meet this requirement. Findings from each of these studies are illustrated and discussed throughout the AKG paper.

Some of the key objectives for this AKG paper are as follows:

  • To discuss the direction of travel in the market, including provider and solutions landscape.
  • To look at challenges and opportunities, old and new, for a range of market stakeholders and participants.
  • To illustrate through market research, the thoughts, behaviours and requirements of consumers and advisers.
  • To offer practical commentary, insight and recommendations on the post-pension freedoms market.
  • To establish a discussion platform whereby relevant discussion and debate can be further progressed during 2018/19.

The AKG paper is available to download at https://www.akg.co.uk/downloads.

Investing

Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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COVID-19 is changing people’s preferences when it comes to BTL investments

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COVID-19 is changing people’s preferences when it comes to BTL investments 1

By Jamie Johnson, CEO of FJP Investment

Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions as a consequence of the COVID-19 pandemic. No country has been immune to the coronavirus outbreak, particularly here in the UK.

Yet even as the country enters another phased lockdown of sorts, demand for UK property has remained strong. After a brief period of suppressed demand after initial lockdown measures were introduced in late March, the UK’s implementation of the stamp duty land tax (SDLT) holiday triggered a rush in demand for bricks and mortar. As a result, both house prices and transactional activity is rising.

With this new surge in demand resulting in an 18-year-high of UK house price growth, according to the Royal Institute of Charted Surveyors, buy-to-let (BTL) investments have also substantially increased in popularity.

It’s easy to understand why. BTL investments offer landlords both long-term capital growth and regular returns in the form of rental payments. And now, as the SDLT holiday deadline beckons closer, investors keen on taking advantage of the comparative discounts on offer must act quickly.

My advice to those considering a BTL investment in the UK is to understand and appreciate the longstanding market changes that have been brought about by COVID-19. Traditional BTL hotspots are being challenged by a rise in tenant demand for real estate in up-and-coming cities and regions.

For example, the COVID-19 pandemic has resulted in the majority of the workforce working remotely from home. Recent data from property listing site Rightmove makes clear the shift in demand away from central London and towards less densely populated regions; with areas like Cambridge and Oxford seeing 76% and 64% more rental searches respectively and searches in areas like Earl’s Court dropping by 40%.

This is the clear result of previously London-based professionals realising the benefits of working from home. As businesses identify the financial drawbacks and COVID contagion risks of having all their staff physically present five days a week, employers will seek out smaller commercial workspaces.

At the same time, we are also seeing workers looking to rent larger, cheaper properties that might be further away from their office. This is due to the fact that they are unlikely to need to commute every working day to their office, even once the COVID-19 outbreak has been contained.

But, where exactly are the best larger, cheaper properties to be found? Where are the UK’s emerging BTL hotspots that need to be on the radar of prospective investors? I explore these pertinent questions below.

Liverpool life

Those who have been closely following the UK’s housing market will know just how primed Liverpool is for BTL investment. As a key recipient of the UK Government’s Northern Powerhouse funding, and with massive developments like Liverpool Waters and Wirral Waters soon to be completed, the city’s housing supply is ready to meet the demands of those taking part in the aforementioned London professional exodus.

With Liverpool constantly ranking No.1 in rankings of UK cities for BTL investment, it’s evident why investors would be keen on completing purchases of Liverpool property before the end of the SDLT holiday. Though even after the SDLT holiday ends, there’re still plenty of reasons to be optimistic about Liverpudlian BTL investment. Prime Minister Boris Johnson’s government is firmly committed to ‘levelling up’ the North of England through regional regeneration, and planned high speed rail connections between Liverpool and other northern cities will only add to the investment potential of the city.

Leeds living

Although Liverpool boasts the highest rental yields for BTL landlords in real terms, Leeds was recently named the most profitable city to become a landlord in the whole of the UK by CIA landlord. By evaluating numerous metrics; including mortgage costs, average rent, average monthly landlord costs and average property prices, they determined that Leeds was the best city for potential buyers to make their first foray into BTL investment.

And, looking at recent trends, it’s easy to see why. Leeds may benefit more from the London exodus than other cities due to its unique position of being a brain gain city’, i.e. one where more students remain after graduation than move away. As a result, it boasts the largest financial services sector in the nation after London, making it an ideal locale for employers in the financial services sector who are seeking cheaper commercial rent outside of London; likely bringing investment and employees with them.

With its strong urban economy likely to be bolstered by its designation as a ‘Northern Powerhouse’ leading business hub, Leeds is ideally positioned for BTL investment over the long-term.

Cardiff’s regeneration

And finally, the capital of Wales brings much to the table when deciding between different BTL investment destinations. With a metropolitan area population of over 1.1 million residents, forecasted to grow by 20% by 2035, demand for property in the city is set to rapidly increase over the next decade. Those able to capitalise on this population growth will be able to access considerable long-term investment opportunities – as recent reports suggest.

Thankfully, it’s unlikely that there’ll be any shortage of housing supply in Cardiff for BTL investors to invest in. Cardiff Bay has emerged as Europe’s largest waterfront development, and the upcoming Central Quay and £500m coastal developments will assist in attracting further investment into the city.

BTL remains a sound investment opportunity

COVID-19 has made evident just how resilient British real estate is as an investment asset. By offering the best of both worlds, namely long-term capital growth and regular rental returns, BTL has successfully remained an attractive and popular investment choice. And, with demand for housing still outstripping supply, the market need for rental accommodation looks set to only grow.

COVID-19 has permanently changed the UK’s housing market and, as explained above, new BTL hotspots are surely due to emerge over the next year. With renters seeking out larger homes in cheaper areas, flexible working patterns will forever change the landscape of the UK’s residential real estate market, and those able to capitalise on it may benefit hugely as a result.

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