Enhanced annuities are a “big objective” for Legal & General as it plans to increase its market share, according to its annuity strategist.
Tim Gosden, head of strategy for individual annuity business at the insurer, told Money Management that the firm plans to use its expertise to draw in more enhanced business.
“We see enhanced annuities as a big objective for us,” he said. “We’ve managed to increase our share this year and we see it as a major market.”
Mr Gosden said that, over the next year, L&G plans to bring in developments that will help in its plans, such as a major IT infrastructure programme that will improve its operational efficiencies and flexibility.
The insurer already has an enhanced offering, as detailed in the latest MM annuities survey, in addition to a conventional option. Although the planned push is not a new product, such as Scottish Widows launching an enhanced annuity, it does represent the firm ramping up its presence in the market.
Mr Gosden said that bringing in the company’s existing expertise would be key to success with annuity customers.
“If you’re in this market you’ve really got to understand what you’re doing, so we’ve already got a rich data set, we’ve got a mortality team, and so we’re going to be deploying our expertise in this market so that we can price effectively for the future,” he said.
According to L&G, only around 35 per cent of individuals could be classified as ‘healthy’ when reaching retirement, providing great scope for them to access better rates from enhanced annuity providers. However, it also found that only around 5 per cent of those taking a retirement income from their pension provider opt for an enhanced annuity.
Mr Gosden noted that the market is “dominated by specialist enhanced annuity providers” – those such as Just Retirement and Partnership, which operate solely on an external customer basis as they do not offer pensions – leaving room for pension providers that offer annuities to up their game.
He also acknowledged the trend toward personalised annuities, previously noted by Partnership arguing that all annuities would be underwritten within five years. “At some point in time, we believe, like others, that all annuities will be underwritten in some way,” Mr Gosden said.