The UK market
Until 1995, the UK annuity market was essentially static, offering only conventional annuity rates. The situation changed with the introduction of enhanced annuities. Today, the providers offer fully underwritten annuities ranging from healthy to severely impaired. Until April 2015 it was more or less compulsory to purchase an annuity before age 75. Since then pensioners have complete freedom to draw down their pension pot, keep it invested or buy an annuity.
Since 1995, Hannover Re has partnered with a number of providers to support product development and encourage market growth. The enhanced annuity market is sophisticated and the providers use a common medical questionnaire, the retirement health form.
Nowadays, there are a number of portals that allow independent financial advisers to access information on products and providers, request comparative quotes, and transact new business including online medical underwriting. Customers obtain immediate guaranteed quotes from a couple of providers by simply answering a limited number of questions. Most cases are assessed automatically and only a few remaining cases with rare diseases need manual underwriting and a general practitioner’s report is required.
Hannover Re has more than 20 years of experience and expertise in the enhanced annuity market. We have access to a large database of impaired lives which we analyse on a regular basis to update our mortality assumptions. Our state-of-the-art automated underwriting system allows for immediate guaranteed quotes and enables Hannover Re and its clients to write enhanced and impaired annuity business on a profitable basis.
Since life expectancy has increased globally over the last years there is a worldwide need for longevity products such as annuities. With our expertise built in the UK we now focus on worldwide developments. Enhanced annuities are not only sold in the UK but also in South Africa and we are evaluating the opportunities for enhanced annuities in Australia where currently regulatory changes offer great chances for enhanced annuities. Solutions for other markets are flexible annuity concepts, such as a combination of drawdown and a deferred guaranteed lifelong annuity. Here, the clients can flexibly withdraw their money say from age 65 to 85, and from age 85 a lifelong annuity will be paid.
Although enhanced annuities volumes decreased after pension freedom, Hannover Re considers the enhanced annuity market to remain an attractive segment and is eager to take up the challenges the new regulation brings.