View more on these topics

Single-tie annuity deals slammed

Annuity Direct director Stuart Bayliss has criticised providers’ single-tie annuity deals, saying they create bad value and damage industry progress on the open market option.

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.”

Recommended

Revolutionary road for banks

The Bank of England and the FSA have put forward what they describe as “revolutionary” plans to make sure the UK banking sector is not hit by another crisis.

The curious market reaction to Brexit

Written by Mike Riddell29 June 2016 Headlines over the past few days have screamed about record falls in sterling, record low bond yields and massive falls in equity prices. However, if you take a slightly longer view of markets rather than simply the one- or two-day reaction, I think it’s amazing how little markets have […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment