Advised annuity sales to fall further

Nearly three quarters of UK annuity providers believe advised sales of their product will continue to fall, while execution-only business continues to rise.

A total of 24 annuity providers, representing 90% of the UK market, responded to Xafinity Paymaster’s inaugural Annuity Industry Survey 2010, and the majority predict a bleak future for IFAs’ at-retirement business.

Overall, 72% agreed the three-pronged attack of the RDR, small pension pots and the increased availability of online information will lead to a drop-off in intermediary sales, and an increase in execution-only business.

Providers strongly supported the idea of a blended set of retirement and annuity products as best for most individuals, but acknowledged small pension pots will stop many of them going down this route, says Xafinity.

Increasingly, annuity providers expect people to use alternate non-pension savings vehicles to save for their retirement, the survey suggests.

Xafinity Paymaster’s director of insurance and payroll Keith Boughton says: “Retirement is a considerably more complex issue now than many years ago. Whilst the report suggests there will be an increase in execution-only business, the question arises: where will the individuals go for self-service advice, whose responsibility is it to provide such advice, and how will this advice be funded?”

Elsewhere, 64% of respondents were confident the existing range of annuity products, along with drawdown and alternatively secured pensions (ASP), will meet the needs of the UK market for the next five years.

Xafinity says comments attached to the survey suggest providers are united in a message to regulators and IFAs arguing for improved quality of advice over greater product range.

It also found respondents were split on whether the removal of the requirement to annuitise at age 75 would increase the risk of the majority of annuity policyholders “running out of money”.

Since the release of the survey, the Government has announced it will move to scrap compulsory annuitisation.