PlatformsNov 3 2014

Annuities set for platform boost as deals loom

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Advisers could soon be able to use their platform to purchase lifetime annuities after a software firm which brought a unique portal offering to market last year revealed to FTAdviser it is in discussion with several operators and is set to sign a second deal in the near future.

Last March Nucleus added annuities to its offering using technology developed by Spire Financial.

The service was rolled out as a pilot, offering a choice of annuities supplied by Just Retirement, LV and MGM, letting advisers quote, underwrite, track and apply for enhanced annuities through the platform.

Trevor Cheal, director at Spire, told FTAdviser that the pilot has finished and the service is now available to advisers on Nucleus, while discussions are underway with several other platforms, one moving to the contract stage soon.

“We saw that a lot of products advisers use aren’t available on platforms, like annuities and protection, so we built a proprietary system that sits outside the platform and gives access to a choice of providers, quotes and underwriting.”

Annuity providers and investment platforms are working through ways of giving consumers more retirement income options ahead of next April’s increased flexibility.

Most platforms already give advisers and consumers the option to manage drawdown funds, but few have much more flexibility for guaranteed income products like annuities. Doing so could help to mitigate the effect of the changes on a market set to shrink by more than 50 per cent.

Andrew Tully, pensions technical director at MGM Advantage, told FTAdviser that despite falling levels of annuity sales since the Budget, many customers still have a need for some level of guaranteed income for life.

He said the simplicity of access offered by rolling out system such as that run by Spire would be beneficial, though he cautioned that sales through the Nucleus portal have been modest.

“Making guarantees easily available to be bought in conjunction with other offerings can only be a good thing from a customer understanding and simplicity point-of-view.

“Attempts have been made previously in trying to do this with little take up. Advisers have so far appeared to prefer buying annuities off platform through existing portals, and in that way they can access the whole market.”

Stephen Lowe, group external affairs and customer insight director at Just Retirement, said that while this is not a new concept, nobody has really cracked it yet.

“I reckon the direction of travel is towards giving consumers a single view of all their retirement income, but that doesn’t necessarily have to be part of a platform setup. Having said that, I do think that platforms will be very interested in getting these systems ready, because the demand is there.”

Others have said platforms will be more involved in the retirement income space but that this would probably focus on areas other than annuities.

Stephen Wynne-Jones, head of marketing at Cofunds, commented: “Providers will be looking to innovate around their core competencies, which are giving degrees of certainty of outcome within products.

“Where these products offer wide investment choices it would be natural for them to seek to offer that choice through a platform, allowing the product to be managed alongside others being used to accumulate and drawdown assets.”

Speaking to FTAdviser, Jon Everill, head of advisory services at FundsNetwork, said he was happy to see more money invested in drawdown being kept on platforms, but stated that customer need for guaranteed income products would drive innovation.

“The technicalities of getting an annuity onto a platform are unnecessary, you would just use diversified, income-focused funds to give that stable, regular income. It could then be paid into a platform based cash account, along with any other accounts you had aggregated together, giving a single monthly payment.”

A spokesperson for Alliance Trust Savings stated that most platforms offer their clients a self-invested personal pension proposition and therefore purchase annuities from life companies as per their instruction.

“Annuity portals being integrated within a platform is still fairly niche. This is likely to become more popular but we believe that the majority of providers immediate focus will be to adapt their propositions to the significant changes that will apply from April 2015.”

Similarly, a spokeswoman for Parmenion stated that as it launched a Sipp wrapper this May, this would be its offering in the retirement space for the time being, although unitised solutions are likely to become available in the future.

Novia’s spokeswoman told FTAdviser that the platform was not planning on introducing any annuities or similar products as there was not enough interest, with most members preferring to use the existing drawdown options available.