Pensioners interested in purchasing annuities with their savings pots face increasingly limited choice as Retirement Advantage has become the latest provider to announce it is exiting the standalone market.
The company has withdrawn its standalone annuity as a result of its acquisition by Canada Life, which offers a “direct equivalent” product.
A Retirement Advantage spokesperson comments: “We currently offer two guaranteed annuity products, a standalone annuity and an annuity which is sold within our innovative drawdown product, The Retirement Account.
“Following the completion of the acquisition of Retirement Advantage by Canada Life, we have reviewed the product set and given Canada Life has a direct equivalent to our standalone annuity, have decided to withdraw our product from the market.
“Going forward we will continue to offer an annuity within our drawdown product as there are significant differences between an annuity held within a drawdown wrapper and a traditional standalone annuity.”
Retirement Advantage says its drawdown annuity will continue to be fully underwritten, offer competitive rates and a “wide range of death benefits and income escalation, with additional tax advantages and flexibility”. Drawdown annuities differ from standalone annuities as rather than just provide a guaranteed income for life, they also enable you to keep some of your pension invested and to drawdown on it.
For existing Retirement Advantage standalone annuity holders, there’s no change as a result of this decision. Those currently applying for the standalone product have until the end of February to complete the process, after which Retirement Advantage will offer customers a drawdown annuity instead.
Collapse in demand ‘hardly a surprise’
The advent of pension freedoms in 2015 has had a deleterious impact on the annuity market. Beforehand, on average 350,000 annuities were sold per year. This has now dropped to around 80,000. Since 2014, more than half of annuity providers have pulled out of the open market.
However, currently the following providers still offer standalone annuities, according to Hargreaves Lansdown:
- Aviva (standard and enhanced)
- Canada Life (standard and enhanced)
- Hodge Lifetime (standard rates only)
- Just (enhanced rates only)
- Legal & General (standard and enhanced)
- Scottish Widows (enhanced rates only)
Tom McPhail head of policy at Hargreaves Lansdown comments: “Retirement Advantage was a relative minnow, accounting for only a few percent of annual market turnover. Given the collapse in demand for annuities since pension freedom was announced in 2014, it is hardly a surprise we have seen so many companies leave the market.”
“This isn’t though a case of ‘last one out turn off the lights’; recent research by Hargreaves Lansdown indicates we may see an upsurge in annuity demand around 10 years from now as the baby-boomers move into later retirement. This in turn could tempt more providers back into the market. It is also worth noting the market share of all the providers which have quit since 2014 is only around 20%, so competition hasn’t been as adversely affected as might be supposed.
“The good news from consumers’ perspective is that the core of remaining providers offer a good range of bespoke annuity products. The absolutely critical rule is to always shop around and always confirm health details, as it can add hundreds or even thousands of pounds onto your annual income.”