Will temporary annuities, which pay higher annuity rates, but for a short fixed term, take off? Well, the recent news that LV= is looking to launch a new fixed-term annuity, has prompted a very positive response thus far. Currently, Living Time is the only provider of this type of product in this market. Its income plan offers retirees a guaranteed income for a minimum three year period or up to age 75 and a guaranteed capital value at the plan’s maturity, which is determined at outset. However,they have suffered as a result of AIG’s near collapse in September last year, because its underwriter, Alico, is a wholly owned subsidiary of AIG.
Alico has been placed in a special purpose sale vehicle and while policyholders’ money has always been secure, the setback that occurred has impacted Living Time’s growth and probably the expansion of the temporary annuities market. However, LV=, a significant player in the enhanced annuity market, is planning to launch a similar product. It is also understood to be considering to offer retirees a fixed-term plan that gives investment options. Their head of annuities, Matt Trott has staed that LV= are looking carefully at the space in the market between a coventional product and an income drawdown contract.
Living Time marketing director Steve Lowe is reported as saying that, if this is true, then they are very pleased. More providers are required in this market to supply the increasing demand from financial advisers and their clients for modern alternatives to conventional retirement solutions. These comments are endorsed to a point by Annuity Portal director, Malcolm Thomas, who has suggested that Living Time had a bit of a disadvantage with their AIG link, which he considers cannot have done them any good at all at a time they were trying to promote a new and innovative product. He added that he considers that it will be good to have LV= in there to help develop the awareness in the annuity market place, particularly as they have a greater public presence through sponsoring cricket tournaments and advertising on the TV.
Annuity Direct’s Stuart Bayliss agrees with all this, commenting that one of the major issues that is slowing down adviser and clients take-up of Living Time’s product is the fact that there is no industry competition so having more than one company there will encourage many more people to look at this temporary annuities option.