Prudential provides annuities for policyholders at Royal London, Zurich, Pearl and Threadneedle while Legal & General has a similar deal with Skandia. Pru is understood to pay around 3 per cent for the business.
Bayliss brands the deals “hugely backward-looking” and says they restrict competition on the open market and take value away from the consumer.
He says: “The Omo can now deliver full market value, including impaired and enhanced as the default provision for all vestings. It must be allowed to do so and the self-interest of the product providers must give way to treating customers fairly.”
Over 20 per cent of Pru’s annuity sales came from single-tie deals in 2008, with 18 per cent through intermediaries.
Bayliss says since brokering these deals, Pru has significantly reduced its competitive position in the Omo market.
Aegon is understood to be looking at brokering similar deals with other providers.
Pru spokesman Darragh Leeson says: “For companies not active in the annuity market, their internal vesting rates would typically be uncompetitive whereas through a partnership with Prudential, these customers receive more competitive annuities from a market-leading provider while also retaining the option to access the open market. This upholds the principles of treating customers fairly.”