UK - Retiring scheme members could be unable to buy an annuity unless the market's capacity crisis is resolved, independent trustees fear.
They say the increased risk of writing policies – due principally to improved longevity – has forced many providers out of the market and has left only two dominant players.
But Thomas Eggar Trust Corporation director Vernon Holgate (pictured) believes these providers may not be able to meet future demands.
Holgate said: “This is a crisis situation.
“Prudential and Legal & General are the only two firms that are in the financial position to be able to write new annuity policies.”
He added: “There are clear pressures on them to consider withdrawing from the market. If they did they might be saying that we can’t buy any more annuities and nobody can retire. This could be a catastrophe in as little as 18 months.”
Chairman of advisory service Trustee Risk Management, Brian Holden, agreed.
He said: “There is an issue about whether the annuities market can cope with future demands.”
Legal & General director of corporate annuities Dennis Canham admitted the firm would be forced to stop selling annuities if it reached “capacity” but rejected claims that the market was heading towards a crisis.
He said: “There is an issue of capacity because we are not a bottomless pit and we have a certain amount of capital that we are prepared to spend each year on this.
“Capacity has been scarce since September 11 and capital has become scarce.”
Prudential head of bulk annuities Ted Clack also dismissed fears of a crisis.
But he added: “We don’t have the capacity to take any more than a finite amount in any one year.”
And The Annuity Bureau managing director Peter Quinton said he did not believe providers would withdraw from the market.
He said: “They might move down their rates, which will bring them less business and allow some of the smaller firms in.”Ind
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