The third-way market sounds a bit like a new cult, and indeed does seem to be taking on a degree of religious fervour in some quarters, but advisers just seem pleased mainstream life offices will be entering this space.
The hope is that the high charges and complicated product features of variable annuities will be remedied by Standard Life and Aegon, thus making the sector more attractive to customers.
Consumer trust is also a key element to this and household names like Standard Life entering the market indicates that variable annuities are here to stay.
Aegon’s product will be a pensionable version of its 5 for Life product and will be called Income for Life.
It is due for launch in May and will work in a similar way to income drawdown but with a fund range that allows Aegon to provide guarantees on income.
Standard Life’s product will be available to all new and existing customers in its Sipp and will take the form of a set of guarantees that clients can add to the funds within their Sipp.
Standard Life’s product is due to launch in late summer. Head of pensions policy John Lawson thinks that third way products have not taken off yet because they are viewed with suspicion because customers do not recognise the names of the providers offering them.
The bad, but unsurprising, news this week was that closed life offices are the worst culprits when it comes to pension transfer delays on the open market.
Research from Partnership Assurance shows that closed life offices have been getting progressively worse on transfer times. Phoenix is one of the worst performers, taking an average of 39 working days to complete transfers over the past three years.
In 2007, Phoenix took an average of 36 working days to transfer cases but so far this year it is taking 61 days which is pretty shocking.
Pearl is not much better, racking up an average of 34 days this year compared to 22 days in 2006 and 2007.
Windsor Life, which seems to be the bane of advisers’ and clients’ lives at the moment, has taken an average of 35 days over the past three years to complete transfers.
To put these figures in context, the Association of British Insurers’ statement of best practice used to state that transfers should be completed within 14 days.
However, this has recently been updated to the more stringent guidelines, suggesting that transfers should be completed on the client’s specified retirement date.
I repeatedly get complaints from advisers over poor service from closed life offices and these statistics appear to validate these complaints. It is about time that somebody tackled them on it.
The ABI suggests that if the life office does not meet the specified retirement date, it should pay compensation to the client. I wonder how many life offices – closed or otherwise – actually do this?
Continuing this week’s annuity theme, Living Time’s product has been reclassified by leading networks which means it can be sold by all advisers.
Living Time sales and marketing director Dave Harris says many adviser firms have mistakenly categorised the annuity as a third-way product which would mean that only advisers with specialist qualifications can sell it due to its complexity.
Sesame, Money Portal, Openwork and Bankhall are among the firms that have reclassified the product and other firms are expected to follow suit.
Living Time has been keen to point out that its product is much simpler than a variable annuity as it has no equity exposure.
Harris says: “Our product is not as complex as variable annuities and there is no investment risk. We are not the third way, we are the new way.”
Now that does make it sound like a cult.