Enhancing clients’ income

Helen Morrissey goes through the latest results on the enhanced annuity market and asks what challenges advisers face when recommending these products to clients.

The enhanced annuity market has undergone massive growth over the past five years and looks set to go on growing into the future.

However, despite this, concerns persist that not everyone who could qualify for an enhancement is necessarily getting one. In this Retirement Planner Inquiry we asked advisers how much they are recommending enhanced annuities to their clients and whether awareness needs to be raised further. 

As with previous Retirement Planner Inquiries, we sent out an email questionnaire to our readers. We received responses from 178 readers.

The first question we asked was whether they recommended enhanced annuities to their clients. A whopping 92% of those providing a response said they did, demonstrating that enhanced annuities have gained a real foothold in the market.

Further evidence of the growth in enhanced annuities was demonstrated in the responses given to the next question. When we asked what percentage of clients qualified for an enhanced annuity we had a range of responses.

Only 15% said less than 10% of their clients qualified for an enhanced annuity, with 2% of advisers saying between 76-100% of clients qualified.

Over a third (36%) said between 11-25% of clients qualified while 28% said between 26-50% did. The remaining 19% said between 51-75% of their clients qualified for an enhancement.

However, while it would seem advisers are really getting to grips with enhanced annuities there is still some way to go before clients really understand the subject.

Only 1% of those providing a response said their clients knew a lot about enhanced annuities with 44% saying their clients didn’t know anything about them.

However, over half (54%) of advisers did say their clients knew something about enhanced annuities (see question one for details).

Challenges

We then went on to ask advisers about what they saw as their key challenges when recommending enhanced annuities.

Over a quarter (29%) said there isn’t enough product choice in the market while a further 26% said client understanding posed an issue. Almost a fifth (18%) of advisers said clients are reluctant to discuss their health conditions while another 2% said this was an issue they were reluctant to bring up themselves.

14% of advisers said they felt the process was too complicated but 16% said they faced no challenges in recommending these products.

One major challenge faced by the annuity industry has been how to service people with a small pension pot in a cost effective way that makes sure they get the best deal.

However, this didn’t seem to pose too much of a problem for the advisers answering this survey with 71% saying they found it easy to find appropriately priced enhanced annuity products for clients with small pension pots.

Only 25% said they didn’t find it easy, while 4% were undecided. See question two for more details.