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Metlife opts for flexible over fixed-term annuity

Grinstead: ‘Look at new solutions in at-retirement area’
Grinstead: ‘Look at new solutions in at-retirement area’

Metlife has ruled out launching a fixed-term annuity but is planning a new flexible guaranteed income product to capitalise on the growing popularity of guaranteed retirement income.

UK chief executive Dominic Grinstead says the company has looked closely at fixed-term products but has decided not to progress with that option.

Instead, Grinstead says it is concentrating on supplementing its existing unit-linked guaranteed income offering with a product that has the option of locking in investment growth on a daily basis.

He says: “Our next product will be more of a flexible guarantee. We see a space in the market for clients to invest in equities but with some sort of floor.”

The current Metlife guaranteed income offering can lock in investment growth but only on an annual basis. The company is hoping to launch the new flexible guarantee in early 2011.

Grinstead says the popular-ity of guaranteed income products has been increasing rapidly as pension savers approaching retirement seek ways of dealing with market volatility and a lack of long-term investment growth.

He says: “People did not really understood the value of guarantees before the crisis but they certainly do now.”

Grinstead says Metlife has written more retirement business in the first half of 2010 than it did in the whole of last year.

Figures from benefit consultancy Towers Watson show the variable annuity market has grown by 34 per cent so far this year and Grinstead predicts this will attract more competition, which will be healthy for the market.”

The second half of Metlife’s year is also likely to be dominated by the acquisition of Alico, due to complete on November 1. Grinstead will not speculate on what will happen with the Alico brand in the UK but says the deal is proof of the company’s commitment to the region.

One of the opportunities that Grinstead has his eye on is the rule changes ending compulsory annuitisation at age 75.

He says: “At-retirement drawdown is a great market to be in and we will look at new solutions in that area.”

However, he says the greater choice offered by removing the requirement to annuitise must be balanced with a need to ensure that people do not exhaust their retirement funds.

He says: “It is really important that clients continue to buy a guaranteed lifetime income. A fixed annuity or a product with a lifetime income is going to give them the security they need for retirement.”

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