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  • June 2016
06

Prudential withdraws amid annuity market changes

Open-access content Tuesday 21st June 2016 — updated 5.50pm, Wednesday 29th April 2020

Prudential will no longer sell conventional annuities through intermediaries due to “market changes”, it announced on Friday.

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The firm said in a statement: "We can confirm that we propose to make a change to conventional annuity business written with financial advisers. 

"As a result of this change, from17 June 2016, we will no longer accept applications for new external conventional annuity business from financial advisers. There is no change to any of the other ways in which we offer annuity products to customers."

The move means the insurer will not accept future applications written by financial advisers. 

However, it will continue to provide access to a conventional annuity for financial advisers with existing pension clients and for advisers' clients holding Prudential annuity income and rate guarantees.

It added existing customers would not be affected by the decision. 

The news came after the merger of two other annuity providers Just Retirement and Partnership. 

Commenting on Prudential's statement and the merger, Tom McPhail, head of retirement Policy, Hargreaves Lansdown, noted the number of providers on the open market was falling. 

He said: "Our worry now is that with fewer annuity providers available on the market, more and more investors may end up bypassing the shopping around process and simply buying an income from their existing provider."

He explained since pension freedoms were introduced in April last year more people arranged annuity deals directly through providers "usually without taking advice". 

Latest figures published by the Association of British Insurers showed that in the first quarter of this year the product saw a revival in popularity, after income levels of standard annuities collapsed to an all-time low in April 2015. 

"Demand for annuities has now stabilised, and has even started rising again in recent months," McPhail said.

"However, far too many investors are still missing out on the best income for their needs because they aren't shopping around."

The announcement from Prudential also coincides with the end of the UK government’s consultation on a secondary annuity market, which finishes today. 

Carried out by the Financial Conduct Authority, the consultation proposed that brokers and adviser-broker firms disclose charges up front for better consumer protection. 

Economic secretary Harriet Baldwin announced in December that a secondary market would take effect from 6 April 2017. 

Earlier this month critics also predicted there would be more sellers than buyers in such a market because of the complexity involved.

This article appeared in our June 2016 issue of The Actuary.
Click here to view this issue
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