Life and pensions is the historic term for the part of the financial services sector that aims to support life and health, and through investments aims to ensure people have financial security in retirement.
The main business involves:
- Life assurance policies (life cover) – these provide a lump sum of money, or a monthly income, in the event of the policyholder’s death before an agreed date. The funds of the policy will go to the policyholder’s beneficiaries – usually the policyholder’s family, or can be used to pay off certain large debts, such as a mortgage.
- Income protection policies – these can be taken out to ensure an income is maintained in the event of a policyholder being unable to work due to long-term illness, injury or disability.
- Pensions – investments to provide financial security in later life. This is now one of the most important areas of the sector, drawing significant media coverage and political attention.
- Investments – as well as being the means by which funds are built up to pay out against the promises made in policies or pension schemes, investments are also an important way of saving for significant future payments – from properties to private education, or simply to make the most of spare funds for the future. Factors to consider include the length of time available to save money, what sort of risks can affect how that money grows, or how we feel about taking risks.
Predicting how much money someone might need or want in the future is a tricky business and making sure that that amount is reached even trickier.
Understanding the risks involved and the needs of clients means that this can be a very challenging part of financial services but ultimately very rewarding, knowing that you are part of preparing someone’s future and helping them reach their goals.
Financial advisers, who are concerned with life and related insurances as well as other forms of retail investment product, are currently required to hold, as a minimum, a Diploma in Financial Planning, a qualification run by the Chartered Insurance Institute (CII).
There are three different kinds of adviser:
- Independent financial advisers (IFAs) who can choose from all available products to select the one that will best suit an individual’s needs.
- Multi-tied advisers who can only sell products from a limited number of companies – the ones to which they are ‘tied’. They still have to find the best product in their range to suit you.
- Tied advisers who only sell products from the one financial company to which they are ‘tied’ – usually their employer. They will choose from the limited range of products available but will still try to find the best one in their range for you.