Variable annuity sales exceed £1 billion in 2009

UK – 11 March, 2010 – The value of variable annuity sales fell nine per cent to £1.05 billion in 2009 compared with 2008 while the number of policies rose marginally during the same period according to research by consultants Towers Watson. According to the firm, the value of variable annuity sales in the fourth quarter of 2009 was £188.4 million, up 32 per cent from third quarter sales of £143.1 million. In addition it said the size of the variable annuity market has almost doubled since 2007 when the research started.

Andy Sanders, senior consultant at Towers Watson, said: “Two thirds of variable annuity sales in 2009 were achieved in the first half of the year, before product redesigns and the exit of the Hartford from the market place took full effect. It was encouraging to see a bounce from the low point in sales in the third quarter, and it will be interesting to see whether this continues into 2010.”

According to Towers Watson, the much reduced sales figures in the second half of 2009 do not change the fact that ‘third way’ products could be appropriate for a sizeable segment of consumers both approaching and at retirement. The firm maintains that the growth anticipated in the ‘at-retirement’ market presents a sizeable commercial opportunity.

Andy Sanders said: “Re-invigoration of this market may be needed to remind consumers and advisers of the virtues of ‘third way’ propositions like variable annuities as alternatives to conventional annuities and income drawdown. It is encouraging that as well as the existing providers, there appears to be at least one or two others contemplating market entry which may provide the necessary impetus in 2010 and beyond.”

Variable annuity sales

Notes to editors

Variable annuities are unit-linked investment products with explicit guarantees, and are currently available from a small number of providers, either as a pension or as a life assurance (investment) bond. The products vary in the way they are constructed and to whom they appeal and when available in a pension wrapper are usually designed to provide regular income payments that are guaranteed not to fall, but may also rise if investments perform well.