Providers have expressed disappointment over the way the Financial Conduct Authority’s recent pension freedoms data collection exercise categorised information surrounding ‘third way’ annuity products.
The collection data states of the number of customers aged 55 or over, who have accessed their pension savings since 6 April, only 20 customers accessed products which bridge the gap between traditional fixed annuities and more flexible income drawdown contracts.
The breakdown states that six people have used third way products between £30,001 and £50,000; one person has accessed a product between £50,001 and £100,000; six people have accessed products between £100,001 and £250,000; and no people have accessed products over the £250,000 mark.
A number of providers are disgruntled at the way this information has been expressed, believing the categorisation to be misleading.
Simon Massey, wealth management director at MetLife, called it a categorisation point and noted the firm had responded to the FCA accordingly.
“I can assure you that 20 is just wrong. It is so obviously wrong. Our business has gone into the drawdown category. It (the FCA’s data) not a reflection of MetLife’s business and nor is it a reflection of other providers’ business.
“Greater clarity over the categories would be helpful. The consequence of a well intentioned exercise has left an unbalanced picture of what is going on.”
An Aegon spokesperson said that it is important to recognise that third way annuities refers to non-traditional annuity products, rather than guaranteed drawdown, which will be included in the flexi-access drawdown figures.
“We have seen a huge increase in interest for guaranteed drawdown and our Secure Retirement Income proposition has been so popular we have revised our expectations up by more than 100 per cent in 2015.”
Steve Patterson, managing director at Intelligent Pensions, said when he saw the statistics it was obvious something was wrong.
“I don’t know on what basis they actually categorise the different products, but it was certainly misleading, and you would have thought that somebody at the FCA would have looked at those figures and said ‘are we sure this is correct?’
“Third way is obviously a generic term which encompasses quite a wide range of different types of arrangement and that might include flexible investment linked annuities where there is some element of guarantee, but its certainly not what we would call a conventional annuity.
“Nor does it conform to the drawdown rules, but it does offer flexibility of income, investment participation, some level of guarantee built it. Unlike drawdown, there is also an element of mortality subsidy which is inherent in annuities.
He added: “Third way is too broad a term, so it would depend on how they actually defined third way for the purposes of that analysis and report.”
An FCA spokesperson responded that it provided firms with an explicit definition of a third way annuity for the purposes of this request and firms reported those figures on that basis.
“We also provided more general guidance regarding completing the request and as part of that guidance we told firms that if they could not distinguish between the different types of annuity, then they should simply include them in their overall total of annuities.”
ruth.gillbe@ft.com
