Second provider rallies to Webb later life annuity vision
Partnership has become the latest provider to signal an intention to innovate products to meet the pension minister’s vision for later life annuities to facilitate a phased retirement incorporating a guaranteed income insurance element.
Mark Stopard, head of product development at Partnership, told FTAdviser the insurer agreed with Steve Webb’s vision for a next generation of deferred product options to act as a fall back for consumers and had carried out initial consumer testing.
He added that the testing had revealed an aversion to inflexible annuities that would delay actual launches, but said this might change two or three years into the pension flexibilities.
“We’ll be looking into these products eventually as I think they will become a bigger part of the picture, but I don’t think there’s really any in the market currently and we’re going to have to get to the next level of understanding in terms of deferred annuity before they become popular.”
Partnership is the second major provider to confirm it is looking at the option, after Legal and General’s head of strategy for individual retirement solutions Tim Gosden revealed his firm waslooking at US ‘longevity insurance’ designs.
Mr Gosden’s comments refer to products which take a portion of, say, 10 per cent of a retirement pot through a regular contribution to provide guaranteed annuity income when the individual reaches a certain age.
Adrian Boulding, L&G’s pensions strategy director, told FTAdviser: “I don’t think anyone else is offering it [longevity annuities] in the marketplace at the moment. It is similar to a deferred annuity, just a variant of that.”
L&G’s product is said to be in the ‘research phase’ amid concerns over initial take-up.
During a Work and Pensions Committee session earlier this month, Steve Webb suggested that post-April innovation is likely to be around products focused on financial decision making later in retirement.
Speaking to FTAdviser exclusively last week, he added that the question of what defaults will be in place for pensioners throughout their retirement and especially as they become older and may be unable to make informed choices will become more critical.
He said: “We certainly would encourage products where if people don’t make an active choice in retirement they do then get an income that will keep them going for as long as they do - I can imagine that sort of thing.”
David Trenner, technical director of Intelligent Pensions, explained that Metlife had some limited success selling deferred annuity products in the US and there could be some scope doing the same this side of the Atlantic.
“It’s really a case of marketing them properly, people are willing to pay for guarantees, but it’s down to how they are told about it. It think it should be on the basis of having fun in your earlier years of retirement and then having a portion of your savings for a guaranteed income later in life.”