The figures, however, pre-date reprices by Metlife and Aegon in response to the increased cost of providing guarantees, The Hartford’s decision to pull out of the market in early May and Aegon’s announcement yesterday that it is replacing its five for life product with the age-related secure lifetime income plan at the end of the month.
Watson Wyatt senior consultant Andy Sanders says: “Sales of variable annuities grew dramatically in 2008 as financial advisers and consumers became more familiar with the products on offer.”
Sanders says the key strength of variable annuities – their underlying investment guarantees – has become much more apparent over the past 12 months.
He says: “There may be some uncertainty in the short-term but fundamentally the success of variable annuities will depend on whether enough people are happy to pay for the guarantees on offer.
“Given the projected growth of the at-retirement market over the next five to 10 years, it will be interesting to see whether the market for variable annuities can maintain – or exceed – its recent momentum.
“And will it be the existing players that fill the gap left by The Hartford? Will a new entrant or entrants see this as an opportunity to get into the market?”