Ailments on the road to retirement

Today, these retirement products account for at least 10 per cent of the annuity market in the UK with sales last year exceeding the £1bn mark. However, while enhanced annuities offer a retirement solution which takes into consideration a wider range of lifestyle factors, these products are not without a few ailments of their own.

While advances in the ability to detect medical conditions much earlier has created a large pool of pension plan holders that qualify for an enhanced annuity, resulting in more players venturing into the enhanced annuity space, questions are still being raised over issues such as: insurers' response and processing times, seding scheme delays, and the Open Market Option.

While there are currently nine enhanced annuity providers in the market, many are still finding their feet, as Stuart Bayliss, director of Annuity Direct points out: "While there are a lot of insurers who claim to be operating in the enhanced annuity market, the reality is that many are still developing their processes and systems. Most have had soft launches for their products, but a lot is still in the melting pot, which means that response and process times are not always clear and this often translates into uncertainty for IFAs."

Tony Foulkes, financial planner for Jonathan Fry & Co agrees, saying: "Although the number of players in this market is increasing, in our experience many of the new entrants seem to be feeling their way, both in terms of pricing and administration. Many still find it difficult to outbid the established providers, with some continuing to be quite conservative in their assumptions while others feel unable to commit to offering a quote without taking further - and often extensive - medical information."

Mr Foulkes and Mr Bayliss both however applaud the introduction of the common application form, saying that it is a positive step towards streamlining the process of applying for an enhanced annuity.

Mr Foulkes said: "The common application form helps to smooth the enhanced annuity application process and enables meaningful comparisons of rates to be made. The providers using these forms include the specialist enhanced annuity providers, such as Partnership Assurance and Just Retirement, and recent new entrants to the enhanced annuity market, such as Norwich Union and Legal & General. This does ease matters for the IFA and speeds things up for the client."

"While the common application form has introduced a bit of uniformity and more clarity in terms of the application form, it is still not enough," Mr Bayliss added.

Seding scheme delays have been another thorn in the flesh for IFAs, and Eden Whittaker, managing director of Whittaker Financial Solutions, feels that all the improvements wanted by government and FSA, as well as IFAs on behalf of clients, are frustrated by what he calls "absolutely appalling procedures and pathetic delays from seeding schemes - who are often closed life offices trying to profit shareholders and private backers by charging for funds under management - which boils down a conflict interests."