Royal London would consider using its newly-branded protection arm, Royal London Protection, to create a hybrid annuity-drawdown product.
Fiona Tait, business development manager at the mutual life company, told FTAdviser there was latent expertise in the business that could be harnessed to design a guaranteed product to meet post-pension freedom needs.
Royal London Protection was created out of the merger of Scottish Provident and Bright Grey under the Royal London brand, a process that ended in April this year.
Ms Tait said that Royal London had not traditionally had the expertise to create annuities, but that new opportunities and needs were opening up as a result of pension freedoms and increasing longevity.
"To be able to do annuities well, you have to be very good at risk management – risks related to life expectancy and longevity and all those areas. And we weren’t," she said.
"That said, we’ve now got Royal London Protection – what used to be Scottish Provident and Bright Grey – so we are actually now in a position where we do have some expertise," she said, adding it would be "really nice to use it".
The answer, she said was "something" in the guaranteed drawdown space - similar to products currently offered by MetLife and Aegon - rather than traditional annuities.
“The traditional annuity market will contract. But we’ll see other kinds of annuity coming out. I think there will be an evolution of the existing standard annuity, possibly not delivered by the same people who currently deliver annuities," she said.
However she stressed that nothing had been decided yet.
Following the introduction of pension freedoms in April 2015, a number of providers including MetLife, Aegon, Axa Life launched hybrid products.
However, take up has been slow, with advisers wary of the complexity and cost of the products.
Yesterday (18 November), Aegon announced it was scrapping four of its off-platform guaranteed products, and focusing exclusively on its on-platform version, Secure Retirement Income.
It stated that sales of the on-platform product had risen 139 per cent over the year, though it not disclose the base of that growth.
Axa Life Invest scrapped its guaranteed product, Secure Advantage+, in October, a few months after it was launched.
Jeremy Phelps, a chartered financial planner with Financial Solutions Wales, said there were not enough hybrid drawdown-annuity products on the market, and those that did exist were too expensive.
He said there was significant demand among his clients for a mix of guaranteed income and flexible drawdown. At the moment, he said the most cost-effective way to do that was through a combination of fixed-term annuities and investments.
He welcomed the prospect of Royal London entering the market, saying it would be "very exciting" to see what they came up with.
james.fernyhough@ft.com
