Legal & General has warned the FSA it has “deep concerns” about the potential for misselling of fixed-term annuity products.
The fixed-term annuity market has continued to grow this year as providers look to offer consumers alternatives to conventional annuities. LV=, MetLife, Just Retirement, Aviva and Primetime Retirement all offer fixed-term annuity products.
Speaking to Money Marketing, L&G group executive director for protection and annuities John Pollock says: “My view is that the fixed-term annuity is not a good product for consumers. They place quite a large bet on markets and longevity in a manner that is uncertain.
“They may get an uplift for a period, and I stress the word ’may’, but I do not think the fact they are betting the rest of their life against uncertain conditions is appropriate. I think conventional annuities represent the lowest-risk way of ensuring the majority of people do not end up in poverty in retirement. We have deep concerns about fixed-term products.”
Pollock says L&G has voiced its concerns to the FSA. He says: “We have heard Martin Wheatley talking about early intervention if they have concerns about particular products. We have certainly voiced our concerns and it would be up to the regulator to determine whether it is worthy of review.
“Unless consumers are very aware of those risks and are assessing them from an informed perspective, then the product is probably not appropriate for them.”
LV= head of annuities Matt Trott says: “I think L&G is missing the point. Fixed-term annuities are designed to provide customers with additional flexibilities that are just not offered by conventional products, without all of the costs and risks associated with drawdown.”
Aviva head of retirement Darren Dicks says: “Fixed-term annuities come with more risk than conventional annuities but we believe the product is potentially appropriate for customers that want to crystallise their pension and take their tax-free cash but do not want to make the final decision about annuitising.”
The FSA declined to comment.