Aviva has been putting processes and people in place to deal with "unprecedented" levels of annuity business over the past year.
Annuity popularity has risen to record levels over the past 12 months as gilt yield increases have given a new lease of life to the pension product.
According to Aviva, this unexpected demand has caused issues for nearly all retirement providers, in terms of the number of highly trained staff able to process the "unprecedented" levels of applications and queries.
This has led to long delays and several complaints, as FT Adviser has reported over the past year or so.
But according to the company, the answer is not simply hiring masses of people to process the applications; there has to be a widescale programme to support staff, advisers and customers, and it has been busy putting this in place.
Speaking to FT Adviser, Claire Reed, head of individual annuities explained how "requests for information" on annuities signalled a "market craze" that companies had not expected or been prepared for since former chancellor George Osborne brought in the pension freedom and choice regime in 2015.
She said: "As rates became more and more attractive, we saw lots of interest from advisers - even advisers we'd never spoken to before. It was unprecedented.
"We've now got an increased distribution and reach in this market, but we are not seeing that growth disappear quarter on quarter."
Reed referred to the Association of British Insurers' statistics, as reported by FT Adviser earlier this year. The figures showed:
- Annuity purchases rose 22 per cent during the first three months of 2023 alone.
- Between January to March 2023, there were 16,256 annuities sold - the biggest number recorded since 17,252 were sold between July and September 2019.
- Annuity premiums for the quarter totalled £1.2bn, which the ABI said was the highest value since 2015 when pensions freedoms were introduced which gave people more flexibility over how to access their retirement savings.
- The Association also said more people have been switching provider, with 10,000 people switching provider in the first quarter of 2023 alone - the biggest number since 2016.
Reed said: "This is a huge challenge. Since 2009, when the Bank of England base rate dropped to its low of 0.5 and remained low for over a decade - there had been mass underinvestment across the industry in the annuity market.
"So this recent growth has tested organisations, and operational systems and processes have been put under strain."
The base rate remained low until inflation soared in 2022, prompting the Bank of England to take action to raise rates. The current rate is 5.25 per cent; the next review is this week (August 1).
Reed said: "We are all working at capacity and need to protect customer service and customer outcomes.
"We are aware there have been points in the past two years where we really felt the strain, and were not able to give the sort of service to customers to which we hold ourselves to account.
"We need to be very disciplined about that right now."
She said Aviva was aware that advisers had been asking questions and having queries that were taking far too long to turnaround, and said the company had been working hard to improve processes and turnaround times.
Action plan
According to Reed: "At the back end of 2023 we were getting a lot of requests for manual quotes, which was putting strain on the team.
"So we have been bringing on staff and training them - but that is not the be-all and end-all."
