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Providers want new name for variable annuities

Providers are calling for variable annuities to be renamed to prevent consumer confusion.

Canada Life wealth management technical support manager Bernard Footitt says describing the recent wave of third-way products as variable annuities is misleading.

He says: “They are not annuities so why are they called annuities? It is confusing and misleading for consumers. They should be called guaranteed drawdown products because that is what they are.

“Standard Life and other companies launching into this market are labouring under this misnomer of variable annuities. We are not saying they are not welcome in the marketplace, just that the name should reflect what they do.”

Prudential head of retirement income Aston Goodey says he suspects that life offices will want to phase out the name in favour of something more apt.

He says: “If we were to launch something similar, we would not look at calling it a variable annuity.

“I think the term will disappear as quickly as it has come in. There are too many connotations, with the products being called expensive and complicated.

“Life offices will be keen to move away from the term and call it something that actually means something to consumers. We are definitely looking at this but the jury is probably out at the moment.”

Footitt says Canada Life is looking at launching a guaranteed product but not for the retirement market.

He says: “We may look more at the unit-linked bond market, like the Hartford linked gilt. This would mean that there would be no income drawdown issue clouding the judgement but it is at the very early stages.”

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