press release

LV= Urges Advisers to Consider 'Safety-First' Approach

A new report from LV=, ‘Navigating the retirement income challenge’, urges advisers to take a more scientific approach to retirement planning and familiarise themselves with different practices to ensure they continue to meet client needs following the pension reforms.

Published today, the report sets out the risks and benefits of the two different schools of thought: the traditional ‘probability-based’ approach, which bases the chances of running out of money in retirement on historical statistics; and the ‘safety-first’ approach which focuses on the individual and aims to remove any risk to essential income. While neither approach is right or wrong, the role of safety-first has grown in importance since the Freedom and Choice reforms were introduced and the risks of advisers making the wrong recommendation have increased.

This follows research from LV= which found that 46% of advisers have never heard of the safety-first approach to retirement planning and less than one in five (17%) are confident they know what it means. However, when advisers were given the definition of safety-first around eight in ten (83%) still said they’d consider using it for clients with smaller pots (for example, less than £150,000).

The rapid pace of change in the pensions market in recent years has presented significant challenges for advisers and many may not be aware why they need to reconsider their approach. The new report, written for LV= by Abraham Okusanya founder of FinalytiQ, helps advisers understand the different approaches, sets out in what scenarios they should consider challenging the existing practice.

While recognising the value of both approaches, LV= advocates that a safety-first approach is considered for all clients as the basis for gaining flexibility without losing the security of essential income, including through the use of a blend of product solutions. However, the probability-based approach may be right for those with more capital where there is also a clear preference and appetite for investment risk.

Steve Lewis, Sales and Marketing Director at LV=, said: “The advent of the Freedom and Choice reforms has radically changed the pensions landscape and advisers need to recognise that what has long been the accepted practice for retirement planning may no longer be appropriate.

“At LV= we advocate a safety-first approach for many consumers and recommend that advisers consider using it, where appropriate, to ensure customer benefits are truly tailored. Using only a single method could have negative consequences for advisers’ businesses, as well as their clients. We hope advisers find this report useful to help them broaden their knowledge and understanding, and ultimately improve outcomes for their customers.”

Abraham Okusanya, founder of FinalytiQ, said: “The UK retirement planning landscape has changed dramatically in recent years and many of the safety nets inherent in the previous regulatory system, such as the Minimum Income Requirement and Government Actuaries Department rates, have been removed. As a result, advisers have been thrown into a new environment and we must question whether existing practices remain fit for purpose. Understanding the implications of different philosophies is vital so advisers can help clients work out the best way to communicate their retirement income needs.”

The report can be downloaded at where advisers can also sign up to LV=’s webinars that explain the issues in the report in more detail.


Notes to editors: 

Methodology: LV= surveyed over 300 advisers online between January and February 2017.

About LV=

LV= employs over 6,000 people and serves over 5.8 million customers with a range of financial products. We are the UK's largest friendly society and a leading financial mutual.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We are currently the UK's number one brand for Insurance and Investments, according to the 2015 YouGov Brand Index Buzz Rankings.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and a range of trade unions.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.

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