LV= confirms annuity market exit

LV= has confirmed its decision to stop selling enhanced annuities following a consultation with employees.

Related topics:  Retirement
Rozi Jones
17th November 2016
LV
"We are currently in the process of removing ourselves from portals, although we will continue to issue quotes if requested directly from us until 17.00 on Friday 18th November."

LV= announced last week that it plans to increase its focus on secure drawdown options as well as its wider Retirement Solutions business.

The provider says the move reflects the changes in retirees’ buying habits since the Freedom and Choice reforms as well as the current interest rate and regulatory environment.

LV= says it has seen increased consumer demand for secure drawdown solutions such as fixed term annuities as well as guaranteed funds and wider income drawdown products.

In a statement, LV= said: "We are currently in the process of removing ourselves from portals, although we will continue to issue quotes if requested directly from us until 17.00 on Friday 18th November. We will accept applications received within the guarantee period of the quote, in line with our current terms of business. We will aim for all applications to be completed by Friday 30th December 2016, however should a scheme encounter any challenges transferring the money in that timeframe we would look to honour the application  – a smooth transition for our customers is paramount here."

The firm will continue to offer standard and enhanced annuities from other providers where they are the right option for consumers via its various advice solutions. It will also look to offer annuity solutions from potential partners that are interested in being part of LV=’s blended propositions, including its Retirement Account.

John Perks, Managing Director of Retirement Solutions at LV=, said: “The pensions market has changed considerably over the last 18 months. Instead of viewing retirement as a one-time event, people are increasingly looking at shorter time horizons and seeking more flexibility in their retirement income.

“In an ongoing low interest rate environment and with Solvency II capital requirements further depressing annuity rates, we no longer feel our enhanced annuities provide good value for customers. We believe it makes sense, therefore, for LV= to focus on a mixture of safe drawdown products, fixed term annuities, guaranteed funds, investments and equity release.”

Tom McPhail, head of retirement policy at Hargreaves Lansdown, commented: “The writing was on the wall after LV= announced their review a few days ago. Given the dwindling number of participants left in the annuity market, it is more critical than ever that investors shop around for the best possible terms before committing to a retirement income decision.
 
“Annuity rates have recovered in recent weeks from their historic lows and are now around 7% higher than they were back in September.
 
“The majority of retiring investors want at least some guaranteed income. Unfortunately the combination of the pension freedoms, monetary policy and the capital reserving requirements imposed on insurance companies have driven up the cost of buying a secure income for life through an annuity. We would like to see policy-makers in government working with regulators and the industry to look at ways to address this problem.”

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