Pru pulls plug on open market annuities business

Prudential 480

Prudential will no longer sell through advisers annuities on the open market but will contine offering contracts to existing customers.

The life company says the decision was made following the impact of the rapid decline in the size of the annuity market since the pension freedoms took effect.

A Prudential spokesman says: “We can confirm that we propose to make a change to conventional annuity business written with financial advisers.”

No new applications from advisers for new annuity customers will be accepted after 17 June 2016.

He adds: “There is no change to any of the other ways in which we offer annuity products to customers.

“We will continue to provide access to conventional annuities for financial advisers with existing Prudential pension clients and for advisers’ clients holding Prudential annuity income and rate guarantees.

“Asset backed annuity business will continue to be accepted on a standard and enhanced basis from financial advisers.

“We, of course, remain committed to helping advisers secure the income in retirement that is best suited to their clients’ needs, whether that is flexible income, a cash payment or a secure income.

“Our existing annuity customers who currently receive regular retirement income payments will not be affected by this decision.”

Hargreaves Lansdown head of retirement policy Tom McPhail warns the move, coupled with the merging of Just Retirement and Partnership, leaves customers exposed to a less competitive market.

According to the firm, the average difference between the best and worst open market rate was 22.1 per cent in May this year.

Despite the pension freedoms, shopping around for the best retirement products has remained disappointingly low. A recent Citizens Advice consumer survey found 57 per cent of annuities were bought after searching the market for alternative products.

McPhail says: “Demand for annuities has now stabilised, and has even started rising again in recent months.

“However, far too many investors are still missing out on the best income for their needs because they aren’t shopping around. Our worry now is that with fewer annuity providers available on the market, more and more investors may end up bypassing the shopping around process and simply buying an income from their existing provider.

“Since the launch of pension freedom, more and more investors are arranging their income directly with pension providers, usually without taking advice. It is imperative therefore that everything possible is done to help them find the best possible deal.”

According to Hargreaves ten annuity firms quote on the open market. They are: Aviva; Canada Life; Hodge Lifetime; Just Retirement; L&G; LV=; Retirement Advantage; Scottish Widows and Standard Life.