Aegon to put ‘annuity-style’ guarantees on platform

Aegon to put ‘annuity-style’ guarantees on platform

Aegon is set to be the first provider to host guaranteed “annuity-style” products within its platform, in the second of two “major” launches in the workplace pension major in the coming weeks, its chief executive has revealed to FTAdviser.

Adrian Grace said the first launch, due within the next two weeks, is a “major initiative in the workplace market, that’s all I will say at this moment in time”.

The second launch, set for June, will see “guaranteed-style” products put on Aegon’s Arc platform, “which will be a UK first”.

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Aegon is one of three unit-linked guarantees players prominent in the market in the UK, alongside Metlife and Axa. Mr Grace said that in the US the firm’s guaranteed products generate about £7bn a year of new business.

Such third-way products, often called ‘variable annuities’ despite being written under drawdown rules, are not a big part of the UK market but are expected to grow in popularity. Axa predicted the market could quickly grow within two years to £3bn.

Mr Grace said: “We have actively played in the guaranteed market in the UK for the last five years, but never really put guarantees on platforms up until now.

“So we are in the process of adding our guaranteed solutions to the platform, which will mean we are the first in the market to offer guarantees on platforms.”

It is not the first time annuities have been available through platforms, though recent innovations have focused on making purchases of standard annuities available using third party plug-ins. As an insurance contract, the products are not held on the platform itself.

A year ago, Nucleus added annuities to its offering using technology developed by Spire Financial.

Trevor Cheal, director at Spire, previously told FTAdviser that as a lot of products which advisers use were not available on platforms - such as annuities and protection - they built a “proprietary system that sits outside the platform and gives access to a choice of providers, quotes and underwriting”.

Mr Grace added that in the post-retirement freedoms market, customers may want annuities, drawdown, or might want to take all their pot, however what they will want more than anything else is some sort of guaranteed annuity-style security.

“This means that when they pass away, that money is not take by the insurance company or the government, but is repaid to the customer.

“To have that as part of the solution on the platform will make us completely unique in the market place. It’s an exciting new proposition that we are eager to get out, but we want to make sure it has been tried and tested properly before we put it out.”

Mr Grace emphasised that the two new launches are “specifically dedicated” to advisers, as that’s where they get the “vast majority” of business from.

“I think advisers are coming into a boom time with all the pension freedoms and we will continue to work with advisers to give them differentiated propositions.