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Variable annuity sales rise

Variable annuity sales rose by 7 per cent to £340m in the first quarter of the year compared with the final quarter of 2008, according to Watson Wyatt.

Since the first quarter, the sector has seen price increases 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 last week that it is replacing its Five for Life product with an age-related secure lifetime income plan at the end of June.

Watson Wyatt senior consultant Andy Sanders says: “Sales of variable annuities grew dramatically in 2008 as advisers and consumers became more familiar with the products.”

Sanders says the key strength of variable annuities – their und-erlying investment guarantees – has become much more apparent in the past 12 months and while there may be some uncertainty in the short term, he says their success is down to whether enough people are happy to pay for guarantees.

He says: “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.”

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