There can be few sectors of the market that can expect as dramatic an increase in potential business over the coming decade as annuities.The ABI predicts that the demand for annuities from defined-contribution schemes will rise from 7.2bn in 2002 to 18.1bn by 2012 and demand from closed defined-benefits schemes could explode from 1.4bn to 35.4bn in the same period. With such a potentially massive rise in the size of the market, it is hardly surprising that many advisers are gearing up to capture their share. While, all too often, IFAs are not seen in a positive light by some members of the Government and civil servants, consumers getting independent advice on their annuity purchase could significantly reduce the cost of funding state benefits as a result of more pensioners exceeding the income level for means-tested benefits. It has, however, been clearly identified in our research that the inefficient paper-based processes that are currently operated in the market mean that the cases that the Government and the Treasury would like advisers doing more of are administratively too expensive for advisers to conduct profitably. When conducting our e-Excellence research on annuities, it became clear early on that a significant number of adviser firms have been pressing ahead with their own e-commerce capabilities in the absence of services being offered from providers. We understand that no fewer than 23 adviser firms have developed or are planning to develop their own bureaux services. This is probably not surprising, given the significant increase in the level of annuity business expected in the next few years. While Prudential and Standard Life emerged as the clear leaders achieving the highest tripe e-rating, Friends Provident, Scottish Equitable and PAFS all achieved a highly creditable double e rating. Only one provider, Clerical Medical, declined to respond to this research as it is not actively seeking business in this area. XML-based quotations, which allow real-time comparisons of client-specific rates, are seen by the adviser as an essential component of the e-commerce offering from any organisation wanting to be a serious player in the annuity market. This is not only a benefit for advisers but also allows the provider far greater flexibility in setting their rates as changes can be made instantly. This also gives providers far more control over the level of business they receive as they can change their pricing quickly to attract or deflect business as appropriate. Considerable concern was expressed at the costs that are incurred in conducting annuity business, particularly when small amounts are involved. However, it was noted that, frequently, clients are reluctant to pay fees for annuity advice so the idea of additional commission which could be deducted from the fund was seen as desirable. The excessive costs which make smaller annuity cases uneconomic for advisers were largely attributed to the time it takes to process this class of business which can frequently result in the original quotation on which the business has been based expiring before the funds are received, thus the actual benefits changing. There were major concerns that consumers, having, understandably, little or no knowledge of how the annuity market works, could hold the adviser responsible. This is particularly the case when such delays can result in consumers missing income payments which can have a detrimental effect on the relationship between and client despite the reason being beyond the adviser’s control. It was strongly felt by the advisers participating in the research that this is an area where there is both the opportunity and the need for more co-operation between pension providers in order to improve the customer experience. Two companies, Equitable Life and Standard Life, however, were regularly mentioned as having particularly effective processes when they are ceding pension monies to a new annuity provider. Overall, there was a view from advisers that this area of the market has not become as e-enabled as it might have done. At first glance, it might appear that because of the time delays that occur in the process, there may seem little point in automating parts of the process to obtain some documentation more quickly. Delays from ceding schemes and time taken obtaining discharge forms will mean annuity business is still a lengthy process. However, upon examination, there are many areas where the potential for errors and delays, failure to communicate information accurately and in the format needed and in ability to match payments to cases when monies are received do make a case for a more automated process. Given the size of the potential increase in annuity business over the coming years, this is only a problem that is going to get much worse unless action is taken to address these problems. As these issues affect and cause difficulties for the vast majority of the marketplace. I am surprised that no proposals have emerged to create some form of industry clearing house capability. It is obvious from our discussions that very significant amounts of work are being carried out by advisers and providers in the operation of highly inefficient business processes. Ultimately,these costs are being borne by shareholders and policyholders so it would certainly be worthwhile investigating such an option. There are increasing signs that our industry not only recognises that we suffer from an extremely poor public perception but that there is a very real desire to do something about it. The dual pressures of depolarisation and preparing for pension simplification has clearly been a massive drain on the IT departments of all providers and giving them another major area to work on in the near future is probably unrealistic. However, April is approaching so perhaps it is time to start trying to quantify industry expenditure on processing annuities so we can identify the size of the prize that may be achievable if we could move to more efficient processing methods. It may be that this would need new legislation. However, as the Government is so keen to see people get the best possible annuity rates they can because of the direct saving on social security costs this might not be an impossible aim.