The cost of guarantees on variable annuity products should be kept at 1% or less of the fund value per annum for consumers to be willing to pay for them, according to three-quarters of attendees at a recent Watson Wyatt debate.
The majority of the audience of senior financial services executives (57%) at the Watson Wyatt Debating Forum were in favour of the main motion that "this house believes that variable annuities provide peace of mind at a fair price".
Asked what sort of percentage of fund per year they thought consumers would be prepared to pay for guarantees for minimum income, 74% said 1% or less per year. Meanwhile 8% said over 1.5% would be acceptable.
Some 67% of the audience said variable annuities were suitable for at least 10% of consumers; with 47% suggesting between 10 and 25%.
The audience were also asked if they thought consumers were driven by price when buying security for retirement products. Here there was a near even split, with 47% saying price was not a driver and 45% taking the opposing view.
Colette Dunn, head of the insurance & financial services strategy group at Watson Wyatt, says: "What we saw was a strongly polarised debate. While a majority of the audience believe variable annuities to be a valuable product for consumers, over 40 per cent are yet to be convinced."IFAonline
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