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The Actuarial Profession : making financial sense of the future
The 3rd Younger Members Convention 29 – 30 November 2004 Chesford Grange Hotel; Kenilworth Younger Members Convention 2004
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REVELATION OR REVOLUTION?
SANDLER REVIEW REVELATION OR REVOLUTION? Younger Members Convention 2004
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Younger Members Convention 2004
Coming up….. When did it begin? What were the issues raised? Solutions? Where will we go next? Younger Members Convention 2004
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Younger Members Convention 2004
The Sandler Review Announced by the government 18 June 2001 REMIT ‘To identify the competitive forces and incentives that drive the industries concerned, in particular in relation to their approaches to investment, and where necessary, to suggest policy responses to ensure that consumers are well served’’ Came from the Myners report Younger Members Convention 2004
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Younger Members Convention 2004
Considerations Product Designs Availability & Distribution in the market Remuneration Value for money The broad findings………… Younger Members Convention 2004
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Younger Members Convention 2004
The 5 C’s COMPLEXITY CONFUSION CHOICES COSTS COMMUNICATION Younger Members Convention 2004
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Younger Members Convention 2004
Complexity in…….. Product Design Nil & Reduced Allocation Periods Surrender Penalties Bonuses Market Value Adjustment Unit charges etc etc….. Younger Members Convention 2004
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Younger Members Convention 2004
Complexity in…….. Taxation Examples Qualifying or non-qualifying plans Withdrawal rules Incentives Different treatments of similar products 5% of single premium investment: withdrawal limit Qualification is a function of premium benefit and contract term Younger Members Convention 2004
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Younger Members Convention 2004
Confusion around… Differing terminology Eg Serious illness; Critical illness Advice received Own product ? All products ? Selected range? Younger Members Convention 2004
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Younger Members Convention 2004
Choices to make… Do I need: waiver of premium benefit increasing cover option critical illness rider Which fund is best for me? In future max 60% equity invt Talk about attitude to risk Younger Members Convention 2004
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Younger Members Convention 2004
Costs incurred….. How much am I paying for advice? Where are my initial premiums going? Is my provider cost efficient? Are there implications for my return? Younger Members Convention 2004
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Younger Members Convention 2004
Communication Do I understand the literature? What is this illustration? What will you tell me in future? Are you being open & honest? A key theme in the presidency of Peter Clark Younger Members Convention 2004
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Younger Members Convention 2004
Public Impact Declining consumer confidence manifests itself in….. Inadequate savings Mis-selling scandals arising …. Personal pensions Endowments All items referred to in the latest Presidential address Younger Members Convention 2004
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Younger Members Convention 2004
The future Simplified charging structures Standardised wording Limit on charges Accessible to individuals of low income No need for advice? Younger Members Convention 2004
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Younger Members Convention 2004
The future of charging PHILOSOPHY --- Keep it simple No more bid-offer spread End of surrender penalties End of initial set up fees Younger Members Convention 2004
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Younger Members Convention 2004
Future Charges Examples already appearing…………. Stakeholder Pensions Maximum annual charge 1% p.a Child Trust Fund Maximum annual charge 1.5%p.a Other proposals are 1.5% for 10 years then reduce to 1% for the remaining product lifetime Younger Members Convention 2004
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Younger Members Convention 2004
Advice More products available requiring no advice Decision trees for own use Improved clarity of status Younger Members Convention 2004
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Younger Members Convention 2004
Communication New disclosure requirements Graphical representations? Single generic example? Less is more? Plain English? Standardisation? CA3 Standardisation has been championed by ABI eg definition of heart attack Younger Members Convention 2004
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Standardisation & Plain English
Definition: Heart Attack ‘the death of a portion of the heart muscle as a result of inadequate blood supply as evidenced by an episode of typical chest pain, new electrocardiograph changes and by the elevation of cardiac enzymes. The evidence must be consistent with the diagnosis of heart attack’ Younger Members Convention 2004
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Younger Members Convention 2004
A delicate balance Younger Members Convention 2004
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What it means for the Industry
Challenges !!! - keep costs low - be clear to all customers - Inspire confidence - Avoid future ‘scandal’ Younger Members Convention 2004
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Younger Members Convention 2004
Thank-you for choosing this session. QUESTIONS/COMMENTS Younger Members Convention 2004
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