Pensions  

L&G looks to enter ‘longevity insurance’ market

Legal and General is looking at launching into the longevity annuity market, according to its head of strategy for individual retirement solutions.

Speaking at a Tisa pensions reforms seminar yesterday (9 December), Tim Gosden said that earlier this year the US had issued final regulations on longevity annuity contracts, amending the rules to allow people to buy longevity products via their individual retirement accounts.

People on the other side of the pond were now able to use a portion of their retirement pot to buy an annuity and they would begin collecting the income by age 85.

The move formed part of plans to rebuild trust in the annuity market, with a 2013 Government Accountability Office report stating “middle-class retirees should convert at least half of their retirement savings into a lifetime income annuity”.

Mr Gosden cited an example of a New York Life product called ‘longevity insurance’, whereby a 68 year old man would pay save $40,000 (£25,500) for a monthly income of $1,000 (£637) if they bought this kind of annuity around at age 58 and waited 20 years to collect his payments.

Mr Gosden said that such combinations of longevity insurance and drawdown were perfect for the UK market, given the new flexibilities coming in next April. “We’re looking into this, we think there is a market. People will go for these products if they are structured properly.”

“We’ve got the most advanced annuity and income drawdown market in the world, it’s all about adopting.”

He added: “The biggest problem with longevity annuities is having people give up 10 per cent upfront, but regular premium design makes them an easier sell.

Speaking to FTAdviser, L&G’s pensions strategy director Adrian Boulding, said: “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.

“You might take a tenth of your pot and put it into one of these. You will buy this at state pension age but won’t start receiving income until you are older, around 85.

“This is a genuine insurance product - it will pay out if you live a long time but if you don’t then you get nothing back.”

peter.walker@ft.com, donia.o’loughlin@ft.com