Asset managers are set to shake-up the annuity market after weeks of dire predictions about the value of annuities for savers.
A report released earlier this month by the National Association of Pension Funds and the Cass Business School found savers were losing billions every year through “murky pricing”, calling for an open market process to be written into all pension funds (PP Online 6 February).
But AllianceBernstein UK head of DC investments David Hutchins questioned whether people should be buying annuities in the first place.
He told PP the asset management firm will be launching a product later this year to challenge the market.
Hutchins said: “We’ve talked for a while about how you do decumulation better and the fact people are frog-marched into annuities. We completely agree whole-heartedly with the NAPF and I think almost the issue is whether people should be buying annuities in the first place.”
He said the open market option advocated by the NAPF would not go far enough: “Annuities are still a product that was around 20 to 30 years ago and hasn’t changed despite the fact we’re all living a lot longer, despite the fact increasingly annuities are making up more of our income. You’ve got to ask if this is the right product in the first place.
“Retirement might be changing a lot but the product we keep selling hasn’t changed.”
Hutchins said AllianceBernstein will be launching a product alongside research into retirement outcomes next month.
He said the current alternatives to annuities were too expensive for retirees, while the AllianceBernstein product will be a low-cost solution.
Rival asset manager P-Solve has also expressed an interest in the annuity space.
P-Solve head of UK investments Damian Stancombe said: “I would concur that the retirement space has been a sadly hugely ignored. I do see this as changing and that change will be more rapid as DC becomes the primary scheme for many and pot sizes grow.
“I always find it bizarre that a typical individual would have up to 45 years to build a pot up yet one day (fixed on market conditions on that day) to fix an income for the next 20 years plus. This is so wrong without even the issues of OMO.
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