The Big Interview: Andrew Megson

Partnership has recently launched an online service aimed at helping people retiring with pension pots of less than £30,000 find the best annuity. Andrew Megson talks to Helen Morrissey about how the service is developing

Why did you decide to develop the service?

When Partnership was acquired by Cinven in 2008 we took the opportunity to conduct a planning review of the entire retirement market. There was a major study by Watson Wyatt (now Towers Watson) that showed there would be exponential growth within the retirement market which is expected to triple between 2005 and 2018. The next issue we came up against was how to help customers engage with their open market option (OMO) as we could see there is a great swathe of customers who are not taking advantage of advice at this point in time.

We could also see the process was proving inefficient for advisers who struggle to provide advice in a profitable way for those with small pension pots. We believe that more than 80% of customers with small pension pots are not accessing advice – those that do tend to get a better deal. We could see there was a great opportunity for us to help customers to get more from their open market option while also helping advisers to transact this business in a more profitable way.

How did you look to meet this need?

We already have a lot of data available in this market such as the OMO statistics etc. However, we also needed to ascertain what it is that prevents people from shopping around. We found that many people either didn’t know they could shop around or else they didn’t know the best way to go about it – they need a simple process.

Purchasing an annuity is not like buying car insurance – a bit of guidance is needed to help them understand what they have. We have to remember that the annuity market is about 10 years behind other areas in terms of technology and the role of technology is vital in helping to strip the costs out of processes.

It took us around 11 months to develop this service. We already had a great deal of expertise when it came to the underwriting and we had to develop the IT. The service is built with open architecture and we are keen to work with other standard and impaired annuity providers as long as the overall experience for the customer is not made overly complex. We found that asking too many questions can be seen as invasive and so we work from a base set of 64 questions.

However, the vast majority of ailments will be picked up within 6-10 questions so the adviser can process annuity searches quickly and profitably. We feel this service is an important innovation within the annuity market as it helps both customers and the adviser.

So what is the plan now?

We are hoping to take the tool to the wider market and expand it by developing a customer self navigation tool. We are hoping that will be ready at the back end of Q3 this year. We thought this would be an important step forward as so much more information is now available online and today’s generation of retirees is now so much more used to surfing the internet.

We’ve already had great feedback from the industry and providers and advisers are all interested in what we are doing. If we can get acceptance that what we have done has helped to move the market forward in benefiting advisers and their clients then I will feel that we will have succeeded in what we’ve aimed to do. I feel we can really make a mark on the industry.

Andrew Megson is managing director of retirement at Partnership