Ask the Experts: Longevity of the unit-linked guarantees market

Question: What are you doing to allay customer concerns about the longevity of this market?

Answer - Colin Bell, European variable annuity product director, Aegon

There are two aspects to this.

Firstly, in terms of the consumer need that these products satisfy, I think that the need for capital or income guarantees underpinning defined contribution pensions or other unit-linked savings is here to stay.

In fact, I can only see the need increasing over time as more and more consumers find themselves taking the risks on their future retirement benefits rather than their employer.

The second aspect is the longevity of the companies operating in the market. Clearly, these are long-term guarantees. Advisers and their clients need to be satisfied that the company that's offering them is going to be around in future to honour them.

We have said that we are committed to the market and see these guarantees as a key part of the retirement jigsaw. Our risk management processes are maintained to ensure that we'll have sufficient funds in future to meet them.

It's an area where insurers can offer something really valuable and different and take unwanted risk off the shoulders of investors. In that respect unit-linked guarantees get back to the principles of insurance - protecting against the effects of potentially damaging events.

It should also be said that whilst we have seen one or two providers exit the market, for reasons not necessarily directly connected with the UK business, to my knowledge no customer who has been sold a unit-linked guarantee product has had that guarantee withdrawn or reneged upon.

Hopefully that gives advisers the confidence to recommend these guarantee products. Current market conditions only reinforce the need.

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