Aviva says it has no plans to ditch its with-profits annuity after Legal & General announced plans to close its with-profits annuity to new business.
On Tuesday, Money Marketing revealed L&G is planning to close its with-profits annuity from 15 April following a review of the market.
L&G head of strategy for individual annuities Tim Gosden says the 9,600 existing policyholders will not be affected by the move. The provider will now develop an investment-linked annuity to replace the product, although this is unlikely to launch this year.
Gosden says: “We carried out a review of the market and decided our with-profits annuity has come to the end of its product cycle. The market is dominated by a couple of companies and a number have revamped their ranges in the last couple of years, in some cases taking ‘with-profits’ out of the name. We could have done that but we decided transparency is hugely important and our product has had its day.
“We believe there is a market for investment-linked annuities and we have seen growth in that market in the last two years. We will launch an investment-linked product but that is unlikely to happen in 2013.”
Better Retirement Group director Billy Burrows says the decision leaves Aviva as the only provider offering a “traditional” with-profits annuity. LV=, MGM Advantage and Prudential offer investment-linked annuities. All four say they remain committed to their existing products.
Burrows says: “Aviva is now the only provider offering a with-profits annuity which has both a regular and a final bonus.
“The problem with old-style products is customers are at risk that, if the final bonus is removed, their income could fall significantly. The new style of with-profits products, which is what Prudential, MGM and LV= are offering, overcome that problem as they are structured around a single bonus payment.”
An Aviva spokesman says: “We have no plans to change our strategy and will continue offering with-profits annuities.”