BRITANNIC RETIREMENT SOLUTIONS
PURCHASED LIFE ANNUITY
Type: Purchased life annuity
Minimum investment: Lump sum £10,000
Minimum age: 50
Income frequency: Monthly, quarterly, half-yearly, annually
Commission: Initial 2%
Tel: 0845 3003321
The panel: John Blunt, Senior manager, Advisory & Brokerage Services,
Alex Benson, Associate, JM Taylor & Associates,
Brian Pack, Principal, Brian Pack Financial Services,
Alan Lakey, Partner, Highclere Financial Services,
Ian Bird, Account executive, Adams Tingle Financial Services
Investment options 5.6
Company's reputation 7.3
Past performance 6.3
Product literature 7.7
Britannic Retirement Solutions' purchased life annuity is not a pensions annuity, which means it can be taken out by anyone who needs an income for life.
Looking at how the annuity fits into the market Blunt says: “There are a few purchased life annuity products offering improved terms for impaired lives and these have been pigeon-holed as long-term care products. An immediate needs annuity can pay out substantially more than an ordinary purchased life annuity provided that the impairment is severe enough. Special terms for non-smokers can also lead to improved rates.” Bird views it as a niche product in a niche marketplace while Lakey says: “It is a worthwhile addition to a growing market.” Pack thinks the annuity market needs brightening up by stressing a different aspect. Benson says: “This fits fairly well in that, especially for impaired lives, there is the possibility of a better income
Identifying the clients the product could attract Pack says: “According to Britannic, one in four people could receive an enhanced annuity due to their lifestyle or health.” Lakey suggests older clients looking for a guaranteed level of income, while Benson mentions those who need a regular income to pay for care of some kind. Bird goes for people looking for income who can accept a loss of access to their capital. Blunt says: “Any person with capital who wants a guaranteed lifetime income. In the case of this product, Britannic is aiming it towards those who have some for of medical impairment or who are regular smokers. Also, same sex couples.”
Looking at potential marketing opportunities Pack points out that it is only of interest to those who qualify for enhanced annuities. Benson says: “It may be an alternative to bank or building society accounts, especially for single or widowed people, with a view to fund long-term care.” Blunt says: “It may create a greater awareness of guaranteed lifetime income products. This may be even more relevant at the moment, when many clients are reluctant to commit to products which carry a degree of investment risk.” Lakey thinks there will be more clients looking for income stability because of the current stockmarket misery.
Highlighting the positive features of the annuity, Lakey and Bird go for flexibility. Bird and Blunt mention the same sex joint life option. Blunt also likes the range of income increase options and the longer than average rate guarantee.
Looking at the investment options Benson says: “It is limited but for this type of annuity there really is no other option.” Blunt says: “It is a guaranteed product and the asset backing is provided by gilt and fixed-interest securities of matching maturities and yields.” Bird thinks this is appropriate for a purchased life annuity.
Drawing attention to the disadvantages of the product Lakey says: “As with all annuities, it is the loss of access to the capital.” Benson agrees and adds this could be very prohibitive especially for higher-rate taxpayers. He also mentions its lack of capital protection. Bird says that the only bad point for this policy in particular is that the guarantee period is only payable as income, not as a lump sum.
Discussing the annuity's flexibility Pack says: “It has the usual choice of single and joint lives, 5 or 10 year guarantees, level or increasing by up to 8.5 per cent. This is all quite normal.” Benson says: “There is not a lot of flexibility. Joint lives and the guaranteed period are about it.” Lakey says: “It is very welcome, particularly the ability to effect a joint annuity with a non-spouse.” Blunt says: “As an annuity, it does not have any flexibility. Some would regard that as the intrinsic strength of an annuity product.”
Assessing the company's reputation Bird says: ” It is generally very good but tarred by its association with the recent bad press its holding company has received.” Benson thinks it is very good, especially in the impaired life market. Pack says: “It is known to break new ground in a very staid market.” Lakey says: “An innovative company which has established a niche presence. Its parent company is up for sale with no takers currently, so this may deter clients and advisers alike.”
Looking at past performance Benson believes it is above average in the annuity market. Lakey says: “It has a fairly short track record but is looking good so far.” Blunt says: “The service has been good and the improved annuity for medical impairments has compared well with the results from other insurance companies. Our limited experience of the admin has been good.”
Considering the competition the annuity is likely to face. Bird says GE Life is the only real competitor that he is aware of. Lakey goes for Prudential and Standard Life, while Blunt suggests immediate needs impaired life annuities from Norwich Union, Bupa and PPP.
On the issue of charges, the panel point out that they are implicit in the rate offered and believes this is reasonable.
Moving to commission, Bird thinks 2 per cent is fine as long as the IFA can justify it. Blunt thinks it is normal, but points out there is extra work needed when dealing with impaired lives and that it may be necessary to agree on a fee basis with clients.” Pack thinks it is average, while Benson thinks it is above average.
Examining the product literature, Lakey feels it is quite explicit and detailed. Pack believes it fits the regulator's requirements, but finds it boring. Benson finds it very easy to read. Blunt says: “Colourful but too much of our insurance language. An improvement could be to emphasise the lifetime income guarantee. In our business, we all think we know what an annuity is but it is wrong to suppose that a prospective client has this knowledge. For most people, the word annuity is a turn off. They need to be enthused by the prospect of an income which is not dependent upon any investment risk.”
Summing up Pack says: “I feel the next few years will see dramatic changes in the annuity market and this product is just one of the steps.” Blunt concludes: “If Britannic Retirement Solutions was to be acquired by a major group that showed a clear commitment to the business and with a good financial strength rating, I feel that advisers and clients would be a lot more confident about using this product. At the end of the day, the result of any annuity recommendation will be rate driven, subject to the underwriting company demonstrating financial strength and administrative capability.”