Hargreaves Lansdown head of pensions research Tom McPhail says Resolution’s pension policyholders could end up with a poor deal on annuities if the life company’s merger with Friends Provident goes through.
One of the proposals of the £8.4bn merger between Resolution and Friends is that Resolution pension investors would be offered Friends Provident annuities but McPhail says its rates are not competitive.
He says product providers should be looking to offer investors the best rates on the market rather than agreeing single-provider deals which offer their customers uncompetitive rates.
McPhail says: “One of the proposed synergies is that Resolution investors would be offered Friends Provident annuity rates. This is not good news for Resolution investors because Friends Provident annuity rates are rarely the best in the market. Perhaps the Resolution policyholders should make sure they own some shares as well?”
Norwest Consulting principal Harry Katz says: “I understand McPhail’s concerns, provided you make the assumption that people will take the option offered to them. Policyholders should be asking an IFA to exercise their open market option.”
Although Resolution and Friends have agreed a merger, several companies, including Axa, Zurich and private equity group JC Flowers, have been linked with 11th-hour bids for Friends while Pearl and Standard Life have also been heavily linked with Resolution.