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Question of trust over US guarantees

A round table debate discussed whether clients will trust the guarantees from US providers after recent market problems.
The Retirement Adviser director of retirement planning Nick Flynn said: “The theory behind these products is fantastic but is there is a question whether the guarantees will be met? I would rather spend money on a guarantee to have it but my question is whether a consumer will believe these guarantees will be paid?”

William Burrows Annuities director Billy Burrows said: “When you are choosing a company to be investing with at retirement, you have got this longevity factor about the company.”
Thinc group director of research David Cartwright said: “It is the longest risk in the market, the annuity risk of any life office, the longest risk you hold.”

Some on the panel said clients might prefer to invest with a company they had been with all that time.

Norwich Union head of annuity propositions Darren Dicks said: “Price is important but the brand and the confidence that the firm will be around is important too.”

But all advisers agreed that if players such as Norwich Union and Prudential were to offer the products, they would be very enthusiastic.

Burrows said clients would increasingly avoid the route of completely unprotected drawdown. He suggested they might take two routes – the first a package from the new providers and what they describe as “equity participation with underlying guarantees” the second from discretionary fund managers who might put together a bespoke portfolio for clients which addressed specific investment risks.

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