Six key issues for platforms from Cofunds
By International Adviser, 19 Aug 15
David Hobbs, chief executive of Cofunds, discusses key issues for the platform industry for the remainder of 2015
We’re currently at the start of a journey following the changes implemented in April 2015, but the actual impact of these changes on the advised pensions market has so far been fairly muted. Clearly the new pensions freedoms have revived interest in retirement saving, although we’re yet to see any large rush to withdraw and virtually no advisers opting for the beautifully named ‘Uncrystallised Funds Pension Lump Sums’.
We have though seen an increase in moving into drawdown, but few exhaust the fund. Among our competitors the picture is similar.
For us, a positive sign is that we’ve seen a very low loss of assets, with only 0.02% of our billions of pounds worth of pension business moving out of the product as a result of drawdown since April 2015. Additionally, we’ve also seen an upturn in new pension money coming in, with March’s gross new pension business running at around 4 times the volume of 2014, and in May, over double.
The same is true of ISAs, possibly due to last year’s reforms as well as the recovering economy. The Investment Association recently reported record inflows of £2.4bn onto platforms in April 2015 – over half a billion more than the 2014 monthly average. This is a good sign of a healthy application of advice.
The sensationalist impact of being able to draw out your funds at the age of 55 – as Steve Webb was at pains to point out in frequent radio interviews before the event – was unsurprising.
As usual the British public showed more thought than many papers would have suggested. This implies that people are more aware of the general direction of life expectancy, of their financial needs in later life and that even relatively small sums can make a significant difference. And this has had a very positive impact when it comes to the media, as now barely a day goes by when you don’t see a story about saving for the future, the benefits of tax free allowances and living longer. Slowly this will create an understanding and a compelling desire to increase saving, which we the industry should be readying ourselves to fulfil.
Getting all this right in the future will rest on two core themes that have impacted the platform industry since outset. Significant investment will continue to be required, and scale will remain critical given the competitive environment that has been catalysed by the RDR and sunset.
Cofunds continues to grow during this challenging time, experiencing a sizeable net increase in platform assets. Our assets under administration continue to grow profitably. I strongly believe that well-managed platforms can, and will, play a fundamental role in this new world.