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Varying quality

If you are interested in variable annuities, look at the new Lincoln product. There are three US products of this type competing for attention in the UK market, with Lincoln following Hartford and Met Life. Of the three, Lincoln’s plan may be most appealing.

Like the others, Lincoln offers a choice of funds, including multi-manager solutions and a guaranteed option. All three products also boast a bewildering array of charges, including fund charges, wrapper charges, guarantee charges and commission charges.

Unlike the other two, the Lincoln wrapper charge is a straightforward £200 a year, which helps bring down the overall cost. I also like the fact that Lincoln’s guarantee can be switched on and off every year.

I am not convinced that these products have a place in the UK market. They are complicated and expensive.

If an adviser wants simplicity, annuities in all guises are available, including Living Time and Prudential with-profits. If the client is happy with more risk, there are a multitude of drawdown products available at much lower cost.

These variable annuities are trying to offer investors the best of both worlds but it appears to me that they may be offering the worst of both worlds instead.

These US products are over-priced, over-complicated and over here. The unanswered question is whether anyone wants them to stay.

Tom McPhail is head of pensions research at Hargreaves Lansdown.

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