Roundtable: What are unit-linked guarantees good for?

Unit linked guarantees: An effective way to protect savers’ capital, or complicated, expensive and unnecessary products?

Unit linked guarantees have divided industry opinion. While supporters say the products give investors the ability to benefit from stock market performance and protect on the downside through the use of guarantees, critics accuse them of being overly complicated and too expensive.

Professional Adviser gathered together top commentators to discuss these issues and many more…

To view the roundtable online, click here

HM: Aegon introduced three unit linked guarantee products earlier on this summer. Why is Aegon so committed to this market, and how do you think it fits in to the retirement income market as a whole?

CB: Aegon has had these products in the US, and in the Transamerica sister company for a number of years, and they saw UK and Europe as an obvious market extension. This is a key benefit insurers can provide that others, say, asset managers cannot.

Individuals are going to be in a position where they’re wrestling with the problems of how to secure income going forward while maintaining flexibility and growth potential. These products could be absolutely ideal for that.

HM: How have you seen market demand for these products developing in the UK?

CB: I think there was an interruption when The Hartford left the market back in 2009. Providers who remained in the market had to re-price their product given financial conditions, so I think the market did take a bit of a knock. It probably took a while for advisers to get their confidence back again, but the market has been constantly increasing since that point.

We are quite happy with the way the market is developing. The annual growth rate is round about doubling every two years. So we see it as an exciting market.

HM: So Colin, from the provider point of view, do you think there’s a role for companies such as Aegon to step in and educate advisers more about the potential benefits of these products?

CB: Yes, undoubtedly, and I think Aegon is trying to do that. I have had a suspicion that part of the issue is this lack of face-to-face contact between the provider and the adviser. The advisers who are not recommending them  are giving broadly three reasons why not. They’re finding that they don’t understand the products, they’re finding them overly complicated and too expensive.