Blending annuities and drawdown is a far better solution for middle Britain than “expensive” variable annuities, according to LV’s retirement solutions managing director.
Speaking to FTAdviser, John Perks said that since the at-retirement reforms were announced last spring and introduced in April 2015, the provider had seen a marked increase in consumers combining flexible and guaranteed products.
“Fixed-term annuities were already growing last year and that trend is just increasing. We’re seeing many people looking to cover the period between ages 65 and 75 before purchasing a lifetime annuity.
“We see combining various products over retirement as a better solution for middle Britain than variable annuity contracts, which can be expensive and complicated.”
His comments follow LV’s results for the first six months of this year, which were published earlier today (28 July), which showed that while annuities overall fell 37 per cent to £146m from £232m during the first six months of 2014, traditional fixed-term annuities climbed 18 per cent from £77m to £91m.
The firm’s managing director Richard Rowney said in the statement that this indicated more pension savers were looking for an income solution that offered them flexibility but had an investment guarantee.
He told FTAdviser that the expectation was for these trends to continue, with less emphasis on new propositions and more on driving up usage of existing products through recently-launched consumer and adviser tools.
On the downside, enhanced annuities fell from £137m during the first half last year to £55m, along with equity release falling 42 per cent to £33m over the last six months.
Mr Perks explained that the latter was essentially due to the former, as the firm’s equity release business is internally funded from annuity revenues.
“This should only be a temporary setback and has led us to seek additional sources of funding both internally and externally, as we’re definitely looking to grow our equity release business to meet demand.”