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Trevor Mitchell

One of the things that gets my blood pressure up is the suggestion that, when an annuitant dies, the life office gets a windfall,” complains Prudential Annuities marketing manager Trevor Mitchell.

He is railing against the ignorance of people who fail to understand the complexities of annuity products. It is a subject close to his heart, having been with the Pru in a variety of guises for over 33 years.

Mitchell has witnessed some seismic changes in the pension market in that time and considers the launch of Pru&#39s flexible annuity product among the biggest.

The timing of the new product could not have been better. Those watching the Chancellor deliver his Budget with ears pricked for annuity reform were left wondering if they had missed something. Not so. The Iron Chancellor left it to industry innovation.

The Pru was quick off the mark to introduce its flexible annuity following the Budget. The product is a hybrid of traditional annuity and income drawdown which allows some degree of control over income and various unit-linked investment options.

It has been developed over the last 18 months with the Inland Revenue, a relationship forged to avoid the fate of rival life offices which have had bans slapped on new products.

The link-up seems to be an arrangement that benefited both the Pru and the Chancellor. “The Inland Revenue was very helpful with development of the product. Clearly, Brown was aware of our developments through it,” says Mitchell.

Mitchell&#39s first job was as a clerk at Prudential before moving over to sell executive pension plans through IFAs.

After a spell as product manager developing additional voluntary contributions, where he oversaw an AVC scheme for teachers, he moved into annuities, starting off as product development manager.

Mitchell says things have changed dramatically over the last few years. “Pensioners are far more active now, physically and financially, than ever before. They are taking degrees and doing things they have never done but they need the money to pay for it, which is why I am so passionate about annuities.”

His mother, 90 last week, has been drawing an annuity for the past 38 years. He says she has done very well out of it and goes on to dismiss clamour for annuity reform as a media-driven non-issue. “The Government has to take the whole population into consideration when looking at existing pension arrangements. I do not think it needs to do anything. Pressure for change has come from the press.”

The Prime Minister&#39s wife, Cherie Booth, QC, obviously disagrees with Mitchell as she is in the process of challenging the Government&#39s policy of compulsory annuity purchase at 75 on the basis of age discrimination under the Human Rights Act.

The case involves pensioner Joe Singer, one year away from enforced annuity purchase, who believes the Government has no right to dictate what he does with his pension just because he hits 75.

Mitchell clearly hopes the case collapses as he believes challenging the status quo could open a Pandora&#39s box. “It is an interesting case but the Government already gives considerable flexibility to pensions. If we are going to question the compulsory purchase of pensions for those at 75, do we then have to question the rule for 50-year-olds? What about the state retirement age of 65? The cut-off points are designed to make the system work.”

Obviously happy to be working within the confines of the current regime, Mitchell believes the Government has done much to develop the pension industry. A rare stakeholder enthusiast, he describes it as a welcome development “providing simplicity in a low-charge environment”.

He thinks many of the ills of the pension world are down to a lack of simplicity and transparency in products, particularly when it comes to annuities. He sees the Pru&#39s flexible product as going some way to address this problem.

“Annuities are misunderstood, often perceived as inflexible and opaque. This product has brought flexibility and transparency, making clearer the mortality cross-subsidy by paying it monthly as a lifetime bonus. Customers also get a yearly statement so they can see it growing.”

Mitchell says the Pru&#39s philosophy is to look at customer needs and try to provide solutions within the existing annuity regime.

The Pru was perhaps one of a handful of life offices which had advance notice of the glaring omission of annuity reform in this year&#39s Budget. It put the Pru at an advantage, so Mitchell is reluctant to bite the hand which fed it.

He says: “One of the post-war successes has been the partnership between the Government and the private sector in providing an income for the British people. The pension regime in the UK is the envy of Europe so we need to build on that and protect it.”

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