It may sound counter-intuitive, but might it actually help the regulated investment advice sector if the reputation of annuities was revived?
The climate is not an auspicious one for the retirement product. Not only is the government making it much, much easier not to buy one, but the product is beset by other challenges too.
The pensions minister, flying a policy kite, wants annuitants freed from the annuities they already have, though industry experts, including many who are no fans of the old life office gang, have poured cold water on that suggestion. But one thing is certain, this sort of policy debate won’t make the product any more popular.
In addition, scenting mis-selling where it has occurred and maybe sensing it where it hasn’t, much of the national media would like many old annuity sales opened up, their appetite whetted by Aviva’s decision to compensate some 250 annuitants with illnesses who should have been offered a better annuity in the first place.
It is unlikely either government or regulator would want to open up the UK’s annuity books, though it remains to be seen what response a combination of claims chasers and the Financial Ombudsman Service’s actions might have on past sales, were a head of steam to build up.
But perhaps all this unpopularity is only skin deep.
A recent survey by Hargreaves Lansdown suggests many of its pension clients are still seeking something that sounds very much like an annuity, at least for a proportion of their money.
The survey involves 6,912 investors, with more than 70 per cent rating a guaranteed pension income as important or very important.
Just more than 55 per cent want income drawdown for some of their pension. So that suggests people are going to want a cocktail rather than one type of product.
It remains to be seen what response a combination of claims chasers and the Financial Ombudsman Service might have on past annuity salesHargreaves Lansdown very much represents the mass market, but presumably this is also very much the story for adviser clients, especially those who are at the less well off end of the client bank.
Of course, annuitising may also make very good sense as clients get older.
Actually, I have been hearing many of the new-style fixed-rate annuity firms making these sorts of arguments for at least five or six years.
What isn’t clear to me, or at least not yet, is what represents best practice.
Advisers and those who help them devise their investment offerings may have processes in hand, although I don’t believe there is a consensus yet or even a healthy debate around the methodology.
What investment advisers need – or so it strikes me – is a suite of competitive annuity products to add to a range of flexible, sensible, mid-market investment solutions.
For that they need a healthy annuity sector. As such, even investment specialist advisers need to see the reputation of annuities – as a component in a solution if not quite the solution itself – to be restored.
Maybe investment advisers should be setting out what ‘good’ looks like for their own clients to both annuity providers and fund managers.
John Lappin blogs about industry issues at www.themoneydebate.co.uk
