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Aviva UK chief David Barral attacks rivals over annuity ‘scandal’

Aviva UK Life chief executive David Barral has launched a stinging attack on rival providers for exploiting their customers by failing to offer enhanced annuities.

Policymakers are coming under growing pressure to address perceived failings in the annuity market, with an FCA review of annuity profit levels and shopping around due to be published next month.

Earlier this month pensions minister Steve Webb suggested people should be allowed to switch annuity providers if they can get a better deal elsewhere.

Barral says the practice of providers selling standard annuities to customers without checking if they could qualify for an enhancement is a “complete and utter scandal”.

He says: “There are providers that are exploiting inertia from customers because they do not offer annuities that are enhanced due to medical conditions, so the customer ends up with a really poor deal. We think that is not acceptable.

“30 per cent of the market is about enhancing the annuity based on medical conditions and yet there are companies out there that find it OK just to let the customer buy an annuity from them even if they don’t offer an enhanced annuity. We think that is a complete and utter scandal.”

Barral says regulation may need to be strengthened to force people to shop around at retirement.

He says: “Customers have to understand there is a full stop between them saving for retirement and then choosing which provider can offer the best income.

“That might have to be done through regulation because we need to force customers into demonstrating they understand the choice they are making and the comparison with rates in the marketplace.”

Hargreaves Lansdown head of pensions research and Pension Income Choice Association chairman Tom McPhail says: “This message about the importance of shopping around is precisely the one Pica has sought to promote these past few years.

“Perhaps now we are seeing even major life insurance companies actively promoting this agenda, policymakers will recognise the value and importance of restructuring the retirement process.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Interesting points given that I would estimate 95% of lifetime annuities we arrange benefit from enhanced rates.

    My concern, however, is that this is muddying the water between product provision and advice.

    Whilst I hate to say it, I’m all for personal responsibility and therefore if the existing provider makes it clear to the consumer they have the option to shop around and that they could benefit from enhanced rates in doing so, it’s the consumers who makes the decision to opt to stick with the current provider.

    The minute providers start to ask questions and provide ‘information’ is the point when clients begin to assume that they are being advised whilst in reality they aren’t.

    Yes, a clean break between pre and post retirement would help but in reality, existing providers are still going to mail shot the client as they have the magic information – the address and the NRD – and therefore I question how this could be achieved.

    Yes it’s arguably ‘a scandal’ but in reality so is people thinking they are being advised when they are in fact being sold a product on a non-advised basis.

  2. It’s also a scandal when providers send out retirement packs offering only a 5 year guarantee period but provide a 10 year guarantee only when requested by an adviser. Pot-Kettle-Black springs to mind.

  3. Breathtaking. What a demonstration by a head banana showing how out of touch he is and what a hypocrite to boot.

    1. Wrong tack entirely. All potential annuitants should be referred to an IFA.
    2. AVIVA has administration that makes the Mad Hatters Tea Party look logical. Quotes come from some sort of offshore centre who son’t know their backside from their elbow
    3. They seem incapable of producing a nil commission quote and the commission is disclosed it’s on page 17 of 19.
    4. AVIVAs rates are invariably not anywhere near the best. Last month (on an impaired case) they were over 14% less than the best quote and only 0.9% (yes less than one per cent) better than the best standard terms quote.

    So all I can say to Mr Barral is ‘glass houses’.

  4. @ Harry.
    Whilst I agree 100% with what you are saying, I think it is a move in the right direction. Enhanced annuities are not always going to be far better than standard. Like everything else in our business it is client dependent. However if one or more of the enhanced providers start shouting things like this it cannot do anything but good IMHO.
    My own network now insist on its advisers sending off for enhanced annuity quotes in ALL instances of retirement income planning to ensure good client outcomes (and of course avoid any possible future complaint that these were not considered).
    I also agree that ALL annuity cases should not be allowed to proceed without advice being given and suitable provider and product recommended. Ban all types of non advised sales of annuities and providers should not be allowed to accept any applications unless it has been recommended by a professional. That is the easiest, fastes and cheapest way to stop all this inertia.

  5. @ Marty

    Unfortunately what you tell me is typical Network nonsense. An impaired quite is only worthwhile if it is fully underwritten and guaranteed against application. If that is what the Network insist on well and good, but the answers to the medical questions will immediately tell you if are wasting time if there is absolutely no impairment.

    Enhancement may be worthwhile provided the provider plays with a straight bat – far from the usual practice in most cases! As for postcodes – again – it ain’t over till the first payment is made! I have had the so and so’s try to renege after accepting the application following a fully underwritten quote. Basically the unpalatable truth is that most life insurers can be trusted no further than you can throw them. Perhaps you begin to realise why the industry is held in low repute and all insurers (life and general) are considered two steps down from Del Boy.

  6. The answer is actually very simple…….ban the OMO. Perversely that is the problem. If at decumalation the client had to transfer out (unless they have a GAR or protected pcls) problem solved. That does not mean that the ‘ceding company’ can’t pitch for the business.

    Also, don’t think advice is the answer either because a great many IFA’s have also mis-sold annuities over many years because fully borking an impaired life annuity was ( and still is to an extent ) a lot of hard work and a great many Advisors do not in any way know well enough the alternatives. The FCA report may well request a review of all annuity sales as for the vast majority of annuity sales the principal of ‘know your product’ has not been adhered to and the sales of ‘own product’ annuities by insurance companies is about as un TCF as you can get!. It is a fact that the vast majority of annuity ‘sales’ in the last decade plus have been mis-sold.

  7. @ Harry – I agree and if the CQF questions shows a “clean” non overweight non-smoker then that is as far as it needs to go. Just keep the form on file for future reference. I hear what you are saying about trying to wriggle out and have found that a provider, once assured that they are getting the business assuming they guarantee the quote are willing (albeit after some persuasion) get a GPR at my request before I send the application and this (so far) has been one way to negate any wriggle room. I dont particularly like annuities for a number of reasons and they are not for everyone but for those for whom it is a suitable product we have to get the client as good an icome as we can with the current stock within the armoury and unfortunately that includes annuities until a better way of giving guaranteed income for life to those who need it.

  8. The answer to this problem is so simple that the regulator’s persistent lack of action is verging on negligence. Providers should be banned from quoting any annuity figures unless GAR’s are available and, even then, policyholders should be informed in unequivocal terms by way of a brightly coloured, standalone, laminated page that they should seek out independent WoM advice to ensure they obtain the best rate for the type of annuity best suited to their needs, possibly by way of an underwritten one. Providers who fail to follow this procedure should be subject to regulatory sanction.

    As for Aviva, they’ve come up with the best enhanced rate for the latest case on which I’m working, so they can do it when they’ve a mind to. L&G, by comparison, on all the cases I’ve put to them, either offer no enhancement or the worst one (and usually lose the first request so it has to be sent all over again). I really don’t know why they’re pretending to compete in the enhanced annuity space.

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