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The Actuary The magazine of the Institute & Faculty of Actuaries

Varied views on variable annuities

Watson Wyatt recently held its seventh debate in a series discussing strategic financial services industry-wide issues. The motion discussed was: This house believes that variable annuities provide peace of mind at a fair price.

Proposing the motion were Mike Kalen, president and chief executive officer at Hartford Life, and John Jenkins, senior strategy development manager at Axa/Winterthur Wealth Management. The opposers were Ian Owen, chairman of Partnership Assurance, and Tom McPhail, head of pensions research at Hargreaves Lansdown.

A total of 57% were in favour of the motion, with the remainder failing to be swayed by the proposers’ arguments. Differing views also emerged over the annual fund charge percentage deemed acceptable to consumers for minimum income guarantees — 74% settled on 1% or less per year, with 8% suggesting that more than 1.5% could be levied.

Debate chair, Collette Dunn, said: “This was the most wellattended debate we have had to date, which in itself — on the night of the Champions League final — shows the strong interest there is in the industry about variable annuities. What we saw was a strongly polarised debate. While the majority of the audience believed variable annuities to be a valuable product for consumers, more than 40% are yet to be convinced.”