Medically-underwritten annuities 'need careful consideration'

As lead advisor on around 75% of all medically underwritten bulk annuities during 2014 (by premium), including the largest such transaction ever undertaken, Xafinity believes that they have a part to play in the de-risking considerations of many pension schemes and are another welcome innovation in the bulk annuity market. 

However, there are a number of additional complications associated with the underwriting process and there are some issues to consider associated with collecting medical data.  As such, careful consideration is required in advance and it will not be an appropriate route for many pension schemes.  However, for some schemes, the underwritten market can lead to significant reductions in premium and attractive outcomes compared to the traditional bulk annuity market, and it can therefore be an effective de-risking tool if used in the right way.

Paul Darlow, Head of Proposition Development at Xafinity, states:

“Medically-underwritten bulk annuities can present a very attractive de-risking opportunity, but only for pension schemes with specific fact patterns. Furthermore, obtaining medical information from members has several complications that need to be worked through – this process, if not managed correctly, can de-rail the whole project and lead to adverse outcomes.  It is important these issues are considered at outset and specialist input is important to make the most of the increasing number of de-risking opportunities being presented.”