Providers must clearly explain the complexities and risks third-way pensions (variable annuities) pose to potential customers and advisers, urges actuary Watson Wyatt.
The consultancy's comments follow market speculation on the suitability of variable annuities; particularly the potential for higher ongoing charges compared with other pension products. Variable annuities give customers equity exposure and guarantees on the level of income the product pays. However, Scott Robinson, a consulting actuary at Watson Wyatt, says customers remain unclear on whether they would get enough value from the guarantees to justify the 3% charges on the products. Watson Wyatt highlights guaranteed income bonds and guaranteed equity bonds as creating similar confusion...
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