KPMG has described the Budget as a ‘game-changer’ for the insurance industry.
In the Budget the Chancellor significantly increased the flexibility for customers regarding how they access their pension savings upon retirement.
KPMG said that the changes announced presented an opportunity for the ‘self service’ financial providers and wealth managers, but stressed that changes pertaining to defined contribution pensions schemes will shake up the approach of pensions and annuity firms.
Phil Smart, UK head of insurance at KPMG, said that the Budget represented a massive shake-up for the pensions and annuities industries, requiring a fundamental shift in the models and business strategies adopted by annuity providers.
Smart explained that annuity providers will have to adapt to a new environment, with volumes of new business potentially much lower than previous forecasts.
The removal of the obligation to buy an annuity opened up a whole range of alternatives, Smart said, and that people should be mindful that there was a danger of out-living their money, which does not happen with annuities.
Mike Smedley, Pensions Partner at KPMG, said that the Chancellor had turned the world of pensions saving upside down.
Smedley predicted that the almost unrestricted access to pension pots in the future will radically change the way that workers save for their retirement, as their previously limited choices give way to greater flexibility, more decisions and more risk.
Smedley warned that this would lead to a knowledge gap in the immediate future, and called on employers, employees and pension schemes and providers to collaborate and develop new approaches that help individuals to make the right decisions.