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Just Retirement – Strictly Confidential 1 A Better Income from Retirement Planning Peter Cantrell Business Development Manager.

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Presentation on theme: "Just Retirement – Strictly Confidential 1 A Better Income from Retirement Planning Peter Cantrell Business Development Manager."— Presentation transcript:

1 Just Retirement – Strictly Confidential 1 A Better Income from Retirement Planning Peter Cantrell Business Development Manager

2 Just Retirement – Strictly Confidential 2 Today we will discuss The opportunity Open Market Option - update Options, risks and considerations at retirement Profitable Advice Grasping the opportunity

3 Just Retirement – Strictly Confidential 3 Handset Question 1 In the 5 year period between 2007 and 2012, the value of the “at retirement” market is forecast to have: 1. Decreased by 5% 2. Increased by 10% 3. Increased by 40% 4. Increased by 100%

4 Just Retirement – Strictly Confidential 4 Source Watsons In Retirement Survey 2008 Value of the At Retirement Market

5 Just Retirement – Strictly Confidential Introduction of OMO FSA Regulation Treasury Review All retireesOMO %60% 30 years of progress?

6 Just Retirement – Strictly Confidential 6 Pre Budget Report – October 2007 Pre Budget Report 2007 Web based tool Review of Transfer delays Review of Wake up Packs Clarify Tax rules Annual Report on OMO UPDATE!

7 Just Retirement – Strictly Confidential 7 Pre Budget Report – October Pre Budget Report 2007 Web based tool

8 Just Retirement – Strictly Confidential 8

9 Just Retirement – Strictly Confidential 9 Pre Budget Report – October 2007 Pre Budget Report 2007 Review of Wake up Packs 40% of “wake up packs” failing to meet regulatory requirements: Failure to point out advantages of shopping around Failure to mention enhanced or impaired rates Not using GAR in illustrations (in house pension) Little reference to the value of seeking advice

10 Just Retirement – Strictly Confidential 10 Pre Budget Report – October 2007 Pre Budget Report 2007 Review of Transfer delays Delays found in 60% of cases reviewed Caused by transferring pension firm in 26% of total reviewed and other parties in 36% of cases “room for improvement on all sides” ABI Initiative

11 Just Retirement – Strictly Confidential 11 The difference enhanced rates can make Note: % increases on average of top 3 standard rates Source: The Exchange 13/11/08 / Just Retirement 13/11/08 £4,392 £4,553 £4,878 Annual annuity income for a lump sum investment of £50,000 Male aged 65 Just Retirement Modest enhancement Material enhancement Severe enhancement £3,785 £3,806 £3,824 Standard annuity providers Provider A Provider B Provider C +26% +10% +16%

12 Just Retirement – Strictly Confidential 12 Put another way……. For £50,000 a well known annuity provider quotes a single life male aged 67 income of £3,334 per annum Just Retirement enhanced annuity for the same 67 year old who qualifies for a modest enhancement £4, per annum ….or an annuity with a 75% spouses pension to a healthy 62 year old wife from Just Retirement of £3, per annum ….or a single life annuity increasing at 4% yearly, well above the BoE’s inflation target, from Just Retirement £3, per annum ….or a single life annuity with 100% value protection from Just Retirement of £3, per annum

13 Just Retirement – Strictly Confidential 13 Prevalence of Diseases and Obesity (2004/5): % reporting at least one disease, by age band Source: The 2004 English Longitudinal Study of Ageing: National Centre for Social Research. Note: Some reported conditions will be immaterial for mortality outcomes or ambiguous in diagnosis. However, other indicators exist and can be used (eg smoking status, cholesterol levels) % Main Disease Groups How many retirees might actually qualify? Other chronic: chronic lung disease, asthma, arthritis, osteoporosis, cancer (excl some skin), Parkinson’s Cardio-vascular: angina, myocardial infarction, stroke, heart failure, heart murmur, abnormal heart rhythm, diabetes

14 Just Retirement – Strictly Confidential 14 Prevalence of Diseases and Obesity (2004/5): % reporting at least one disease, by age band Source: The 2004 English Longitudinal Study of Ageing: National Centre for Social Research. Note: Some reported conditions will be immaterial for mortality outcomes or ambiguous in diagnosis. However, other indicators exist and can be used (eg smoking status, cholesterol levels) % Obesity Up to 40% are likely to qualify for enhancement How many retirees might actually qualify?

15 Just Retirement – Strictly Confidential 15 How many get the correct benefits? Source: ABI and Watson Wyatt

16 Just Retirement – Strictly Confidential 16 3 Key Questions If “Yes” answer complete a Short Medical Questionnaire Additional Questionnaire (condition specific) if required GP Report Do you Smoke? Are you taking Prescriptive Medication? Have you been hospitalised for a Medical Condition? A reminder of the process

17 Just Retirement – Strictly Confidential 17 Who are the main losers? Only 10% of funds are > £50,000 Source: ABI 2008 data for 2007 annuity sales

18 Just Retirement – Strictly Confidential 18 Today’s high OMO rates increase critical yields. Requires monitoring regularly when in USP Yield based on return required to match relevant age annuity income to and at age 75 What about USP alternatives?

19 Just Retirement – Strictly Confidential 19 The Income Drawdown Process 1. Determine Income Level 4. Assess Risk Profile3. Construct Investment Portfolio2. Calculate Critical Yield Enhanced annuity rate?

20 Just Retirement – Strictly Confidential 20 Today’s high OMO rates increase critical yields. Requires monitoring regularly when in USP Yield based on return required to match relevant age annuity income to and at age 75 What about USP alternatives?

21 Just Retirement – Strictly Confidential 21 The Income Drawdown Review Process Past Investment Performance Outlook Current Investment strategy Gilt Yields Income requirements Attitude to risk Changes in circumstances Income Requirements Critical Yield Assess Risk Profile Construct Investment Portfolio Enhanced annuity rate?

22 Just Retirement – Strictly Confidential 22 Add in 1% p.a. for guaranteed income High growth rate raises doubts over ability to match annuity income, especially if enhancement available. Death benefit must be a significant factor

23 Just Retirement – Strictly Confidential 23 Who can’t afford the risk? Gross Earnings = £26,000 Basic State Pension =£ 4,700 Second Tier Pension, say = £ 5,000 Private income required = £ 7,600 Fund required (joint life increasing)= £200,000 £200,000 is not a large fund £17,300 is not a large total income: many will need more Despite appearances, this is not a wealthy client Anything less cannot sustain a short-term shock In these cases critical yield is not a factor

24 Just Retirement – Strictly Confidential 24 Value Protection Clients in “poor health” can achieve income without investment risk, plus return of capital in the event of death before age 75. Value Protection Return of purchase price less income paid up to age 75 Proceeds taxed at 35%

25 Just Retirement – Strictly Confidential 25 Guarantees – The Cost No Guarantee 5 Year Guarantee 10 Year Guarantee 100% Value Protection £3,654 £3,639 £ 3,587 £ 3,419 Source: Just Retirement 24/11/08 Male age 60 - £50,000

26 Just Retirement – Strictly Confidential Value Protection – Payment on Death Death after 6 months Death after 5 years Death after 10 years Death after 15 years £1,710£48,290 £21,388 £15,810 £17,095 £34,190 £51,285 £31,388 £32,905 £10,276 Tax Male age 60 - £50,000 Annual income: £3,419

27 Just Retirement – Strictly Confidential 27 Uncertain economic climate Pension Fund fallen in value Leave fund invested in the hope that it will recover View that annuity rates will improve if markets pick up Deferring annuity purchase

28 Just Retirement – Strictly Confidential 28 Can you afford to forego this income? Are there other assets that you can live off? If so, for how long? What is the risk that you need to draw your income at an even worse time? Are you prepared to continue working? If so – for how long? Deferring clients – questions to ask

29 Just Retirement – Strictly Confidential 29 In December 1999, the FTSE100 peaked at 6930 – it has not reached this level since The latest peak was at 6751 in June 2007 – 7 years later From December 1999 to June 2007 annuity rates for single males declined by 18% How long?

30 Just Retirement – Strictly Confidential 30 Is deferring the right option?  Impacts all aspects of at pensions planning at retirement  increases risks associated with USP and some ‘third way’ products in retirement.

31 Just Retirement – Strictly Confidential Male aged 65 - £50,000 Age of Client Total Annuity income:- received starting at age 65: Total Annuity income received starting at age 66: Difference 65 £3,859 £0 -£3, £7,719 £ 4,169 -£ 3, £15,439 £12,504 -£ 2, £42,459 £41,683 - £ £54,038 £54,188 + £ 149 Source: The Exchange. Assumes Standard annuity rates Assumed fund growth for deferral period 7% with an allowance of 1% for charges Is deferring the right option?

32 Just Retirement – Strictly Confidential 32 Handset Question 2 1. I would like to receive a copy of Just Retirement’s USP Guide 2. I would like to receive a copy of Just Retirement’s Cost of Delay fact sheet 3. I would like to receive both the USP Guide and the Cost of Delay fact sheet 4. Nothing, thanks!

33 Just Retirement – Strictly Confidential 33 Buy An Annuity A secure income for life Not dependent upon the stock market Options available: Enhanced rates for up to 40% of clients Lump Sum death benefit Provision for Spouse / Dependents Inflation proofing income Guarantee periods

34 Just Retirement – Strictly Confidential 34 Standard Annuity Commission1% Enhanced Bankhall/PMS Commission 1.5% Flexible Commission  Funds up to £20,000 - £500 commission  Funds over £20,000 – up to 2.5% Flexible  Commission up to a maximum of £10,000 Profitable Annuity Business

35 Just Retirement – Strictly Confidential 35 Best Standard RateJust Retirement Enhanced Rate £ 500 Commission £ 3,897 £ 750 Commission £ 1,250 Commission £ 4,500£ 4,463 Source The Exchange & Just Retirement 17/10/08 £566 more income Flexible Commission - £50,000 fund

36 Just Retirement – Strictly Confidential 36 Grasp the Opportunity! Prepare to be proactive in this market place Plan to be profitable in this market place Review your advice process for “at retirement” Keep up to date with developments – join Benefit from Treating Customers Fairly

37 Just Retirement – Strictly Confidential 37 Handset Question 3 1. I would be interested in an Annuity Referral Service 2. I would not be interested in an Annuity Referral Service

38 Just Retirement – Strictly Confidential 38 Contact Us Your next steps? For more information, please contact: IFA Sales Support Visit:


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