Aegon Ireland’s expertise as a guarantee solutions provider has been built up over the past 10 years but Barry Cudmore, the company’s managing director of guarantees, believes the UK Government’s decision to abandon compulsory purchases of annuities may be about to thrust the market into overdrive.
In an exclusive interview with International Adviser, Cudmore points to Aegon Ireland’s role in the launch of a targeted product to meet the growing opportunities in the UK, and explains how he hopes to grow the business across Europe.
What are your plans for the UK?
We launched a pensions solution during July in conjunction with our colleagues in Aegon UK. It is called Secure Retirement Income, and Aegon UK will be selling this and reinsuring the guarantee to us in Dublin.
We have been working very closely with them and it is a project that we are particularly excited about. We have wanted to get into the pension space for some time, and the timing for us now is absolutely perfect.
The Secure Retirement Income product is very similar to our Secure Lifetime Income solution but is actually in the pension space, so we are providing a guaranteed income to people with accumulated pots of pension savings.
It is also the first fully integrated lifetime income guarantee that is available on a platform in the UK.
Simply put, we are providing retirement insurance to those at or in retirement. Our product mitigates the risk of outliving your money, meaning your income is guaranteed for life. You participate in the markets and so you have upside potential. Your fund does well and your income can increase. If your fund value falls, your income is protected and will never decrease.
You can also access your cash at any time and you can leave your remaining fund to your loved ones when you pass on.
These are the kinds of needs that consumers are telling us they are concerned about as they face retirement, and we have responded with this development.
What is driving the demand?
What we see across the market is a strong desire for security; our products all come with a guarantee. Second, people are looking for some sort of flexibility as well – flexibility they do not get from other secure products such as immediate annuities.
People are concerned about making a lifetime investment on a single date and not getting the potential to change their mind later on in life. Products like ours give them that extra flexibility.
The pension liberalisation in the UK has really opened up the potential for products like this to play a much bigger role than they have in the past.
How strong are the guarantees?
We have been providing these guarantees since the late 1990s when we acquired Transamerica in the US. They brought decades of experience from the US where these unit-linked products form part of mainstream retirement planning.
We have managed to leverage that experience in hedging and general risk management to establish a base here in Europe, so we can then bring that expertise to bear in the UK, Germany and elsewhere.
We launched these products in 2006 and we have ridden right the way through the 2008 financial crisis, continuing to invest and expand the team. That is why I have 100% confidence in our ability to provide a robust product that draws on the widest possible degree of expertise.
The benefit of having gone through that crisis is that you do learn a heck of a lot, so it really does mean we have done our homework should something like the 2008 financial crisis threaten to happen again.
How else do you expect to growth the guarantees market?
We have had quite a lot of interest from other product providers. It takes a long time to build up the experience and capabilities to manage these risks, and not every product provider or institution has the appetite or capability to do that.
We recognise that and we also recognise the need to grow this part of the sector and make it a more mainstream market for ourselves and others, and to bring the benefit of these types of products more to the fore.
We are having a range of discussions that are confidential at the moment. However, we are certainly seeing an appetite for discussions at this level from a range of providers.
These conversations are taking place across a diverse array of organisations across the industry – essentially anyone who is targeting a client base of people near or at retirement.
