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informed The bi-annual epublication about opportunities in the retirement market.

Just Informed Issue 1 Autumn 2012

2012 – it’s a record breaker

Just Retirement Limited


Working together

Teamwork underpins business success, not just within a company but also through strong ties with other organisations for mutual benefit. This first edition of Just Informed shines the spotlight on some of the changes and developments within the retirement market that we believe creates opportunities for you and your customers too. Just Retirement is recognised as an expert and an innovator in the retirement market, the leader in enhanced annuities and second biggest provider of home equity release plans.

By continuing to invest in innovation and expertise, we are opening up new opportunities to partners who can see ways to use the power of their own brand to reach out to new customers in a dynamic market. For partners we offer both a specialist equity release advice service and non-advised annuity selection services. These services draw from agreed product panels or the whole of market as required. I hope you enjoy this inaugural edition – we would be delighted to receive your thoughts and feedback. Stephen Lowe, group director of external affairs and customer insight, Just Retirement

Britain’s ‘summer of sport’ has been a testament to the power of teamwork. Each success, from the Olympics to the Paralympics, was a demonstration of the extraordinary feats individuals can perform by working together towards a common goal. Just Informed Issue 1 Autumn 2012

Just Retirement Limited


Contents:

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2012 – it’s a record breaker

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Equity release – don’t do it!

Mind the gap! Tweet about us now - we’d love to hear your feedback

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Retirement decisions – give them a helping hand

We have the passion – 10 of the best

It’s time to shop around

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Just Informed Issue 1 Autumn 2012

Get online now - dig deeper and get more info www.justretirement.com/enhanced annuities

Just Retirement Limited


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2012 – it’s a record breaker It wasn’t just the Olympic Games that created new records in 2012. This year the number of people celebrating their 65th birthday also reaches new highs, a consequence of the post-war spike in the birth rate. More than 800,000 people turn 65 this year, a staggering 150,000 more than in 2011.

Just Informed Issue 1 Autumn 2012

The ageing population creates a major financial challenge for the state about how best to allocate scarce resources towards pensions, health and social care. With the public coffers depleted, the onus is on individuals and their families to take more responsibility for paying their way. This is a growth area for private sector companies who can help them find and buy the products and services they need.

Today’s retirees are realising that when they stop paid employment and switch on their pensions, their income will drop sharply. Most will have some retirement provision, but probably not enough to maintain their preferred standard of living. For example, ABI figures for the annuity market show that the average case in June 2012 was £32,259. This generates an annual income of between £1,560 and £1,865 . Even those that do have enough to live on comfortably will still face difficult decisions around inheritance and long-term care costs.

Just Retirement Limited


01 Summary of research findings • More than 50% of home owners have lived in their home for more than 25 years • The costs and hassle of moving put them off downsizing • Debt is seen as a practical tool to achieve better standards of living • 6 in 10 of those approaching retirement said they would not sacrifice their own lifestyle to gift money on death • Children who are better off than their parents generally agreed it was more important that their parents enjoyed a better life • There is enthusiasm for passing on money during one’s lifetime when children or grandchildren need financial help

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


01 2012 it’s a record breaker Retirement is a complex time both financially and emotionally, and a large part of our success depends on understanding the needs of clients and delivering suitable solutions. We recently carried out a major research project based on more than 300 hours of interviews with homeowners aged from 55 upwards to better understand their financial circumstances, hopes and fears. The study focused on homeowners shining light on the attitudes people have towards the wealth tied up in their homes, particularly those that can be described as “asset rich, income poor”. Home ownership rates in Britain are high, and industry figures suggest our pensioners have over £756billion in property equity. For many, the home is their biggest financial asset but deciding if, when and how to access this resource needs professional advice to avoid problems and misunderstandings.

Just Informed Issue 1 Autumn 2012

Downsizing is one obvious solution because selling up and moving somewhere smaller and cheaper to manage can immediately deliver financial benefits. But downsizing has cons as well as pros. More than half the people in the research had lived in their homes for more than 25 years and moving was seen as an emotional wrench. They also were put off by the hassle of finding an acceptable new home in a suitable location, losing space to accommodate possessions and family, and the high selling, repurchasing and moving costs eating into the capital released. Equity release loans allow people to release some of the wealth built up in their property while still remaining in their own homes. The loan is secured on the property but, unlike a traditional mortgage where the borrower repays monthly, the interest rolls up and does not have to be repaid until death or a move into long-term care. Today’s retirees have a very different attitude towards debt than previous generations, seeing it less as a sin and more as a practical tool to help them achieve better standards of living.

One of the most interesting findings in the research was around attitudes towards inheritance. Those who have been retired for 10 or more years are more likely to believe in a duty to leave as much as possible to the next generation, even if it means going without during their retirement. This is a contrast to the views of those approaching retirement who are much less inclined to sacrifice their own living standards in order to leave money to their children. Nearly half agreed that they intend to enjoy their retirement and spend their own money, while six in 10 said they would not sacrifice their own lifestyle to gift money on death. However, there was genuine interest from about half the respondents in equity release solutions that would allow some of the property value to be ‘ring-fenced’ to be passed on at death.

This is not necessarily a selfish viewpoint, but a realistic and rational response to the fact that children may be more comfortably off than their parents. The children interviewed generally agreed, claiming it was more important their parents enjoyed a better life rather than leave an inheritance. Interestingly, very few specifically mentioned it was important to leave the house itself, even when it had been the family home. There was also enthusiasm for ‘pre-inheritance’ and the idea of passing on money during one’s lifetime providing financial help to children when they need it, for example, as a deposit on a home. Only a small number were aware that this practice could help reduce inheritance tax later on.

Just Retirement Limited


01 2012 it’s a record breaker There are a number of key points that emerge from the research that point to long-term trends that create opportunities for companies dealing with people in the final years of working and moving into retirement. It reinforces the evidence that the income squeeze on pensioners is very real and happening right here, right now. It shows that people are reaching retirement with outstanding mortgages – as many as one in 10 and growing. Finally, it shows that people are accepting that the state will not provide for their old age.

The market for financial services in retirement is undergoing profound changes in many ways, driven by the need for retirees to shop around and make better choices. The financial advice landscape is being reshaped, pension provision is being overhauled through initiatives such as the National Employment Savings Trust and the purchase of annuities to provide retirement income will soon be subject to new rules designed to ensure people shop around for a suitable deal. Only a few years ago, the so-called ‘grey pound’ was being lauded as the key to economic growth in the UK. Today’s retirees may be having a tough time but they also make up a fastexpanding market with new priorities in need of options and intelligent solutions.

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Just Informed Issue 1 Autumn 2012

The Just Retirement group of companies specialises in providing financial services and products to people in and approaching retirement, helping them to choose wisely and squeeze more from their savings and investments. As the market leader for enhanced annuities and the second largest provider in the equity release sector we are actively looking at ways to bring new innovations in areas such as long-term care. Whilst many of our customers come via professional intermediaries such as independent financial advisers, we also form partnerships with a wide range of private companies, public sector organisations and charities enabling them to refer customers they believe can benefit from our expertise and great service. For partners we offer both a specialist equity release advice service and non-advised annuity selection services. These services draw from agreed product panels or the whole of market as required.

Just Retirement Limited


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Helping people make the most of equity release

Changes to pension schemes, such as moving from defined benefits to defined contributions, and endowments falling short of their predicted returns are just two reasons why retirees might need to consider leveraging value from their other assets to have an enjoyable retirement.

Just Informed Issue 1 Autumn 2012

Equity release is no different to any other financial services product; customers need to receive specialist advice to be sure it is the right solution for their personal circumstances. Yet 44% of homeowners who would like to benefit from equity release do not know where to get advice. In response to increasing market needs, Just Retirement Solutions Limited was created and launched in 2006. Just Retirement Solutions provides specialist equity release advice to home owners across the UK. Treating customers fairly is at the heart of the way our group does business and we have added protective features to safeguard homeowners using the service.

Our specialist advice service ensures home owners get the right advice for their circumstances even if that means saying “No, equity release is not the right solution for you�. In addition, every case is doubled checked to ensure that the right advice has been given. All of our advisers are highly qualified and hold not just the Chartered Insurance Institute (CII) certificate in Equity Release (ER1) but also hold CII corporate finance certificates in UK Financial Services, Regulation and Ethics (CF1) and Mortgage Advice (CF6) or recognised equivalent qualifications.

Just Retirement Limited


02 Key features: • Provides specialist advice on equity release and only equity release • Supports home owners through an exploratory process that ultimately allows them to receive quotes and then purchase an equity release plan • Selected providers are all members of the Equity Release Council (ERC) • Two meeting process • Only recommend equity release if it is the right solution for the customer • Every customer case is checked to ensure the best advice has been given • Customers are encouraged to involve friends and family • No cross selling • No fee for receiving advice if the recommended equity release plan is not taken

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


02 Help them achieve a better income in retirement We have a two-meeting sales process, and actively encourage customers to bring along friends and family. There is no upfront advice fee so there is nothing to pay if a product is recommended but not taken or if equity release is not a suitable solution. Our specialist equity release advisers work with selected providers who are all members of the Equity Release Council (ERC), so home owners are protected by the ERC Code of Conduct. They can be confident that they can continue to spend the rest of their lives in the property and that they will never owe more than the property is worth. If they decide they want or need to move they can; their equity release plan moves with them provided the new property meets the provider’s criteria. [ERC logo]

Just Informed Issue 1 Autumn 2012

Home owners wanting to go ahead with an equity release purchase will need to pay an arrangement and advice fee, a property evaluation fee and their legal costs. We have helped over 15,000 people access the equity within their home The Just Retirement Solutions specialist equity release advice service has been running for six years. During this time we have helped over 15,000 people access the equity within their home, total value in excess of ÂŁ286m. We currently write 1 in 8 equity release plans in the UK and more than 200 financial intermediary firms have referred to the Just Retirement Equity Release Service. Together with partners including Saga, AgeUK and the Daily Mail Group we are helping more people to have a just retirement.

Just Retirement Limited


03 By Stephen Lowe, group external affairs and customer insight director, Just Retirement

closing the retirement income shortfall gap

Autumn has marked the introduction of new rules that aim to encourage millions more employees to start putting aside money for retirement. Workers will be enrolled by default into pension schemes and have to actively opt out if they feel it is unsuitable. Auto-enrolment, which is set to be rolled out over the next five years starting with the biggest employers, seeks to address some longstanding problems with pensions. Although all organisations with more than five employees had to offer a pension, lack of understanding or apathy has often put employees off joining. The result is that many of the baby boom generation now heading into retirement are woefully underpensioned and facing a cash-strapped rather than a comfortable retirement.

Research carried out by Just Retirement earlier this year found a worrying 60% of over-50s who continue working until they are eligible for State Pension will not have enough income to maintain their current living standards. Threequarters of this group would have to work and save for an extra 11 years – well into their 70s – to enjoy the same lifestyle as they do today.

60% of the over 50s will not have enough income in retirement to maintain their current standard of living Just Informed Issue 1 Autumn 2012

Just Retirement Limited


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Just Informed Issue 1 Autumn 2012

Just Retirement Limited


03 closing the pension shortfall gap Of course, starting a pension or suddenly pumping in meaningful amounts of new money is not an option for most in the runup to retirement. The government is also unlikely to come to their aid with an increase in benefits while saving more via solutions such as NEST – the new government-backed National Employment Savings Trust – will only work over the long-term. There is £756billion held in unmortgaged equity by the over 65s

There are two main ways to access this property wealth. The first is by downsizing which means selling the property and finding somewhere smaller and cheaper. The second is by borrowing against the value of the home using an equity release plan. These differ from standard mortgages because there are no monthly repayments. Instead the loan plus interest is only repaid when the home is no longer needed and can be sold, usually when the occupants have moved into long term care accommodation or died.

At one time it was usual for homeowners to extract larger lump sums, often for specific reasons such as holidays, home improvements or to help children with weddings or house deposits. But latest figures show that twothirds of people now opt for ‘drawdown’ plans where smaller sums are accessed on a more regular basis. This reduces the amount of interest building up and perhaps hints at the growing numbers who are using equity release as a way to supplement their day to day living expenses.

This area of financial services has more protection than any other with what amounts to a ‘triple lock’ to ensure customer decisions are fully informed. It is mandatory for clients taking out equity release within the ERC standards to go via a professional adviser, they must also use an independent solicitor and finally the plans are regulated by the Financial Services Authority.

[ERC logo] In the shorter term, some of those facing a pension income gap do have one significant factor in their favour – the wealth tied up in their properties. Home ownership rates are higher for older people and most of today’s retirees have benefited from rising house prices during their working lives. In fact, the over-65s are estimated to have around £756 billion equity in their properties. This property wealth is going to play an increasingly important role in helping the current generation of retirees achieve acceptable standards of living.

Just Informed Issue 1 Autumn 2012

Equity release turns property wealth into cash Equity release allows people to turn illiquid property wealth into cash while staying in their own homes. It avoids much of the hassle of finding a new property and the costs of selling and buying which eats into any capital released. The equity release industry has evolved in recent years, in terms of both consumer protection and innovation of new types of plan. Although held back by the credit crunch, the market is once again growing and likely to reach around £1 billion for 2012.

Strong consumer safeguards apply to the equity release market, in terms of regulation and industry safeguards and guarantees. A new industry body has been created – the Equity Release Council (ERC) – to ensure that products are safe and accessible for consumers. It builds on the work done over two decades by forerunner Safe Home Income Plans (SHIP) to create safeguards and enforce rigorous standards. The Council’s membership includes not just equity release providers but also qualified financial advisers, lawyers, surveyors and other intermediaries.

Just Retirement Limited


03 closing the pension shortfall gap Equity release is not well known and not well understood even by those who had heard of it. Our survey of homeowners aged over 55 revealed few could name providers without being prompted and many were unsure where they would go for advice. As with all financial products, the key to growth is consumer confidence. This creates a clear opportunity for trusted brands to reach out to their customer base. A quarter of people had heard of equity release and had a positive view while just over a third said they have heard of the idea but knew nothing about it. This suggests large numbers of people with open minds. Around 8 per cent said they would be interested in equity release if they wanted or needed to raise money in retirement. That equates to 800,000 of today’s over 65s, compared to current annual equity release sales of just 17,000.

Just Informed Issue 1 Autumn 2012

This is a market reaching only a fraction of its potential and future growth is almost guaranteed as the number of people in retirement continues rising. The key to further growth is consumer information and consumer confidence. Safeguards are important but the government, private companies and the voluntary sector also have a role to play in promoting knowledge and confidence. The entry of more household name brands as well as niche specialists will help to raise awareness and boost competition.

Equity release allows people to turn illiquid property wealth into cash while staying in their own homes. It avoids much of the hassle of finding a new property and the costs of selling and buying which eats into any capital released.

The equity release market currently only reaches a small proportion of those who could benefit but equity withdrawal strategies should be at the heart of every homeowners retirement planning.

Just Retirement Limited


04 Retirement decisions: give them a helping hand Just Informed Issue 1 Autumn 2012

The retirement transition can be an emotional time for many people. Whilst some see retirement as an opportunity to indulge favourite hobbies and pasttimes and to get involved in new interests, others can find themselves mourning the loss of their identity, especially if their working life consumed a large proportion of their time and energy. And then there is the financial impact. Not many people are fully prepared for retirement and that’s where, together, we can help. Just Retirement Limited


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Key features: • Provides information regarding the Open Market Option and the retirement process in general • Supports individuals through a decision making process that ultimately allows them to receive quotes and then purchase an annuity • Panel or tied product offering • Offers telephone and web based support • Can be an advised or non-advised service

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


04 Retirement decisions – give them a helping hand For organisations and brands looking to provide additional value to their customers, Just Retirement Solutions Limited can help you give your customers approaching retirement a helping hand with their retirement decisions and with shopping around for their pension income. Providing retirees with an easy to use, comprehensive resource could make the difference to their retirement being enjoyable or having to watch every penny. Help them to understand the retirement process, make better financial decisions, optimise their retirement income and identify the practical and emotional changes that can accompany retirement.

For those who are starting to think about retiring, our telephone and online service can help them to understand their current position and what the state pension will be. There are useful planning tools such as a guide to retirement and a budget planner to help people understand how much income they will need. There is even a 12 month countdown to retirement to help ensure the transition is as smooth as possible. Our partners include Co-op Financial Services, confused.com and the Daily Mail Group.

Individuals at the point of retirement can jump straight to finding out about the different types of annuities that are available. They can also learn about the various ways to ensure their income doesn’t get left behind by inflation, identify how much retirement income their pension savings can generate for them and, when required, purchase an annuity. Our service solutions can offer products from the whole market, selected panel or a tied offer.

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


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We have the passion 10 of the best We passionately believe everyone deserves a just retirement. Treating customers fairly and outstanding customer service is at the heart of everything we do

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


05 We have the passion 01Marketing expertise – content for ads, communications, literature, letters and websites

02Fee free, advised and non-advised sales services

06Equity release expertise and innovation – we’ve been the second largest provider of equity release since 2005

07Equity release pledge – no negative equity and your customer’s right to remain in their home for life

03Competitive introducer commission that create a new revenue stream

04Marketing leading annuity portal and personalised underwriting service

08Enhanced annuity expertise – we’ve been a leading provider of enhanced annuities since our launch in 2004

09Deep underwriting approach – in 82% of annuity cases deep underwriting generates a better retirement income than a shallow approach

05Exceptional customer service – our customers have higher than industry average satisfaction levels according to ABI

10 of the best Just Informed Issue 1 Autumn 2012

10Reputation – made The Sunday Times Top 100 Companies to Work For in 2010, 2011 and 2012. And we’re the only company to have been twice voted Company of the Year in the Financial Adviser Service Awards

Just Retirement Limited


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Just Informed Issue 1 Autumn 2012

Just Retirement Limited


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Change for the better Shopping around to find the best deal on insurance, energy, mobile phones and a host of other expenses is an everyday occurrence in modern day life. The introduction of new rules designed to encourage Britain’s growing army of retirees to choose more wisely when buying their retirement income means that we will soon be shopping around for our pension income.

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


06 Change for the better We are just a few months away from new rules that are set to impact on how millions of pensioners in the coming years secure their retirement income. The change creates opportunities not only for traditional pension companies but also for a host of other organisations that are well placed to spread the message among their own customers. Typically, retirees use their pension fund to buy an annuity that pays an income for the rest of their lives. A poor choice at retirement may reduce income by thousands of pounds over a long retirement. More than half of retirees buying annuities currently accept the ‘default’ option offered by their own pension provider rather than shopping around for a better deal. Shopping around is particularly important for those who can often secure a higher annuity income due to health and lifestyle issues. Around one in five of all annuity buyers currently secure an enhanced annuity but research by Just Retirement Limited suggests that up to three in five could qualify for higher rates.

Just Informed Issue 1 Autumn 2012

The Association of British Insurers believes their new Code of Conduct for Retirement Choice, due to come into force in March next year and compulsory for all the organisation’s members, will ensure that the ‘baby boom’ generation is actively encouraged to buy annuities that are appropriate to their needs and lifestyles. Although annuity buyers already have the right to shop around, the new code addresses criticism that pension companies have done little to direct customers to the most appropriate option. The new code imposes tougher conditions on the sales process and adds transparency. This includes clearer and more relevant information and signposting to sources of advice. Most importantly, the customer must be asked a number of questions about their personal circumstances which will prompt consideration of their options, and they must explicitly and clearly be made aware of the risks arising from their answers, particularly from underplaying any health or lifestyle issues. The pension company must also highlight the options, particularly enhanced annuities and the much higher income they can potentially offer, and inform customers whether they offer them.

Just Retirement Limited


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Although annuity buyers already have the right to shop around, the new code addresses criticism that pension companies have done little to direct customers to the most appropriate option.

Just Informed Issue 1 Autumn 2012

Just Retirement Limited


06 Change for the better Application forms will no longer be included in the pre-retirement information, addressing concerns that many pension savers may have felt obliged to fill it in or simply decided it would be faster than investigating alternatives. Research cited by the National Association of Pension Funds and Pensions Institute recently highlighted estimates that poor annuity choices could be short-changing each generation of retirees by up to £1 billion over the course of their retirements, reducing their quality of life and heaping extra costs on taxpayers in the form of state benefits. “The new code is important for the growing numbers reaching retirement and needing to use their accumulated pension fund to buy an income capable of meeting their needs for many years to come,” said Stephen Lowe, group director of external affairs & customer insight at Just Retirement.

Just Informed Issue 1 Autumn 2012

“At a time when pension incomes are being squeezed as a result of economic difficulties, it is particularly important retirees choose wisely. Buying an annuity is often one of life’s biggest financial decisions and, once taken, it cannot be reversed.” He said that the new code will be an important factor in the development of the market in financial services for retirees in the years to come. “The ageing population is a trend set to continue for many years. Every business should be thinking about the opportunities this opens up in finding solutions that older people need. “Companies should prepare to benefit from a flood of new customers into the retirement income market. Technology is reducing the cost of dealing with customers, particularly those with smaller pension pots who may not have been able to exercise choice even if they wanted to.

“We are also seeing major consumer brands start to work with annuity and retirement finance specialists, through partnership and white-label deals, to capture a share of the market.” “We are also seeing major consumer brands start to work with annuity and retirement finance specialists, through partnership and white-label deals, to capture a share of the market.” As the baby boom generation moves into retirement, there is likely to be a move towards personalised solutions – not just annuities but also in areas such as long-term care planning, inheritance and equity release. “Those companies who take the time see how they can meet the changing needs of customers in later life will be in demand. Our goal at Just Retirement is to help our partners understand and benefit from these profound and unstoppable trends.”

What you need to know From 1st March 2013, pension companies can no longer rely on the customer’s inertia or ignorance. Instead, they must ensure their communications inform customers approaching retirement about: • His or her retirement choices • The different product types available, and their appropriateness for the customer’s circumstances, including enhanced annuities • The benefits of shopping around for the most appropriate and competitive retirement income product Opening up opportunities Specifically, pension companies must: • Encourage the customer to gather comparative quotations from different providers • Make available all information needed for shopping around in one easily accessible place • Prominently highlight the benefits of shopping around • State clearly that other providers might offer a higher level of retirement income • Not allow the customer to purchase an annuity unless the customer has contacted them • Not include an annuity application form in their communications unless specifically requested by the customer

Just Retirement Limited


06 Shopping around

£38,200 2.1 million

The retirement market – the facts Just Informed Issue 1 Autumn 2012

• By 2050 15.5m people will be over the age of 65 in the UK – up from 9.9m in 2008 – meaning retirees will account for nearly 25% of the population • 10m people alive today will reach 100 • Today 2.1 million pensioners are reported to be living in poverty – that’s 18% of retiree’s • The over 65s are the fastest growing group of people seeking debt advice in the UK

• 18% of retirees have outstanding debts – the average debt being £38,200 – 24% pay over £500 per month to service these debts • The average annuity income for a woman is £99 per month and for a man £151 per month • State pensions now account for up to 69% of a pensioners annual gross income

Just Retirement Limited

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