Legal and General is exiting the with-profits annuity market and plans to replace the product with an investment-linked annuity.
L&G head of strategy for individual annuities Tim Gosden says the firm’s with-profits annuity will be closed to new customers from 15 April following a review of the market.
He says the 9,600 existing with-profits annuity customers will not be affected by the move.
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.”
Gosden says L&G will develop an investment-linked annuity product to replace the with-profits annuity. However, this is unlikely to launch this year.
He says: “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.”
L&G will notify advisers of the decision today.
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 providers say they remain committed to their existing products.
Burrows says: “Aviva are now the only provider offering an old-style with-profits annuity which has both a regular and a final bonus.
“The problem with these 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, which is what Prudential, MGM and LV= are offering, overcome that problem.”