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McPhail mauls ‘third-way’ pension products

Hargreaves Lansdown’s head of pensions research Tom McPhail has criticised many “third-way” retirement products, saying he sees no point in them and questioning their prospects in the UK.

Hartford Life, Lincoln and MetLife have recently introduced flexible annuities into the UK market following the success of the products in the US.

McPhail says: “I am struggling to find what niche it is they are going to fill. I am not convinced. Most people will still end up with an annuity or a drawdown product. I cannot see many people going for the middle of that spectrum.”

But Hartford Life managing director for marketing and distribution John Enos says: “It was the feedback from our research with IFAs that coined the expression ‘third way’ products because they saw a need for them. The clear message was that there was a missing piece in the retirement market.”

Lincoln Financial Group head of income in retirement Simon O’Connor says: “Both annuities and drawdown have risks. These products give consumers the best of both worlds. They get the flexibility of drawdown and the guarantee that comes with an annuity.

“The issue is education at the moment. It is a matter of educating both IFAs and consumers about these products. The experience that we saw in the US was that it took a certain amount of education to get people used to the product before it took off.”

MetLife head of communications Rosy Atal says: “We know there is a market out there for alternatives to drawdown and traditional annuities from the feedback we have had. And the fact that more firms are launching into this space further proves the point.”

McPhail says: “Maybe they have fundamentally misunderstood the UK market. I do not think I am alone in this view. I am unconvinced as to their merit and what their market is. The UK is one of the most sophisticated markets in the world. Just because it has proved to be a popular product in the US, it does not necessarily follow that it will also be popular in the UK.”

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