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Life offices fend off CII fellows&#39 attack

Product providers are hitting back at criticisms in a controversial report by a Chartered Insurance Institute working party that they are artificially increasing annuity rates to win market share.

They claim the report is misleading and does not reflect the market.

The report by a group of CII fellows, who examined retirement planning advice, was published last week. It concluded that life offices knowingly use outdated mortality calculations to distort annuity rates in an attempt to improve their market share.

The report also raised concerns that with-profits returns could be used to subsidise imprudent levels of commission on stakeholder-friendly pension plans.

The CII fellows voiced further alarms at the “worrying” lack of investment in direct equities among income-drawdown plans, raising fears that policyhol-ders&#39 income expectations may not be met.

But NPI director of national accounts and corporate pensions David Tild-esley has parried the report&#39s attack. He says: “We were bemused. We use older mortality rates but there are easier ways for a provider to buy market share if it wanted to.

“As far as the criticisms of income-drawdown products not investing enough in equities are concerned, if the investment is in with-profits, then much of it will be invested in equities anyway.”

Scottish Mutual pensions development director Leslie Gray says: “It is up to the actuary to decide the most appropriate tool to work out mortality.”

Scottish Widows senior manager (stakeholder pensions) George Andrew says: “The report seems to be second-guessing life offices&#39 business. It is difficult to see how they get to the conclusions.”

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