What about a variable annuity for life? Aegon’s Otto Thoresen says variable annuities will actually beat bonds and ‘redefine’ the pension and annuity market. Indeed, he has insisted that Aegon, who now sponsor the Lawn Tennis Association and the current tournament at Queen’s, remains committed to the variable annuity market following their recent announcement that they are to drop their Five for Life product.
Aegon is replacing the Five for Life product with a Secure Lifetime Income plan which will offer age-related guaranteed levels of income as opposed to a flat 5% income proposition. This is the latest setback we have seen in recent weeks for the variable annuity market following the unexpected decision of US provider Hartford to leave the UK market, and rivals such as Standard Life and Prudential which have put their plans to launch similar products on ice.
Speaking at a company presentation made in the City, Thoresen, the Aegon UK chief executive, said he still saw variable annuities taking off in the wake of recent tax changes that had rendered investment bonds less attractive to consumers. He suggested that single premium investment bonds have been set back by recent tax changes that have made them less attractive to consumers, as has equity market uncertainty, and he sees the variable annuity redefining that particular market segment in the UK.
Aegon also last week also announced its withdrawal from the group risk arena and Thoresen explained the move by pointing to their weak positioning in the market. He said that with group risk, essentially the issue is that Aegon were sub-scale in a market that was really dominated by four of their competitors.
Thoresen also claimed that their (Aegon’s) corporate pensions business was strong, and he argued that performance was being hidden by some headline figures showing the business to be down. He stated that because that market is significantly built at the moment on people consolidating their pension funds, hopefully looking to find good annuity rates at retirement, the drop in the equity markets means those pension funds are lower, and, while the underlying activity in this area continues to be strong, the headline numbers are actually down.
