Life - Articles - Life and Pensions Outlook for 2019 from EY

James Tufts, UK Head of Life & Pensions at EY, comments: “The industry is set for a challenging year and will have to navigate its way through mergers, de-mergers, joint ventures, disruptive value chain plays and the macro-economic and political climate, as well as trying to engage customers, please shareholders and satisfy the Regulator. Not an easy task, particularly considering the Brexit headwinds and an unsustainable savings and protection gap, but one that it has to succeed at.

 “The industry, at over £1.5 trillion of AUM and over £150bn of annual premium income, is a vital one - but it will need to transform in order to flourish, with technology and data at the heart of the changes.”

 M&A activity set to continue
 “We believe that the current spate of M&A activity is set to continue, and that 2019 will see an increasing diversity of deals in both shape and size. Further cross-sector deals are also likely as firms look to strengthen weak spots in their value chain coverage. There is also a growing sense that smaller Defined Benefit schemes may start to merge to achieve economies of scale, and sub-scale Master Trusts may also do the same.”

 Spotlight on retirement and retirement savings in 2019
 “2019 is expected to be a pivotal year for retirement and retirement savings. The FCA’s Retirement Outcomes Review recognised that retirement post-Pensions Freedoms is still an immature market, but set a clear expectation that firms must remain committed to delivering the best outcomes they can for customers, and keep pace with emerging good practice. Companies are announcing new retirement-focused features regularly, and we expect 2019 will see the launch of a number of revolutionary retirement-specific propositions.

 “In retirement savings, the industry will be watching April’s rise in auto-enrolment contributions carefully to see if it drives an increase in opt-outs. If they hold steady, it will mark a major achievement in helping millions more people to build up retirement savings. But it is only the start. As individual pots become more substantial, companies will need to help savers understand the value of what they have saved. As people change jobs, the task of how to manage fragmented pension savings will become more pressing. And as other countries have found, the debate will soon turn to how much more people need to save.”

 Regulatory agenda set to be busy again next year with cyber security and operational resilience likely to be key focus
 “The development of the dynamic regulatory agenda heralded by the Financial Advice Market Review will continue, with the FCA now publicly talking about shifting focus from the suitability of individual advice to long term customer outcomes.

 “The importance of cyber security and operational resilience will also continue to grow. The Treasury Select Committee recently announced an investigation into the failure of banks’ online services. As insurers, wealth and asset managers complete their digital transformations, they can expect the same level of scrutiny.”

 War for talent will be a key battle ground in 2019
 “The war for talent is still to be fought as people with excellent analytical skills and strong communication ability are being sought for key roles across the sector. This trend will continue as functions continue to seek even more efficiency via technology, whilst adding even more strategic insight to their organisations as well as real time reporting to aid rapid decision making.”

 “The real challenge for 2019 and beyond is how to safely and sustainably achieve the level of transformative, digitally-led, change required to compete and win in today’s market, whilst delivering on the regulatory agenda. The task is a tricky one, but the reward for success is market leadership and playing a key role in delivering on the industry’s social purpose.”

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