Axa are saying that they are pulling their enhanced annuity rates offering, citing the new European capital requirement regulations. These regulations are likely to mean insurers need to hold more cash (capital) to ensure they can meet their ongoing obligations, making enhanced annuities unattractive to offer, Axa says. A spokesman of theirs has stated that they launched a small-scale pilot of enhanced annuities back in 2007 to test the market. Following the pilot, they have concerns about the impact Solvency II capital requirements will have on the annuity market, and therefore they have decided not to launch a full enhanced annuity offering.
Axa says it has informed advisers of its plans to withdraw this pilot scheme as soon as it is reasonably possible. Solvency II is due to be introduced in a couple of years, in 2012, imposing higher capital requirements on insurers. Many insurers are therefore concerned that the requirements could push up the cost of annuities, i.e. produce lower enhanced annuity rates, at a time when retirement incomes are already stretched. However, the good news is that the availability of these annuities will continue from the principal providers.
