Medically-underwritten annuities should not be jumped into and need careful consideration, Xafinity has cautioned.

The consultancy firm has highlighted how, despite medically underwritten annuities appearing to present an "attractive de-risking opportunity", if they are not managed carefully, they can lead to "adverse outcomes".

Xafinity head of proposition development Paul Darlow said obtaining medical information from members has “several complications that need to be worked through”, adding if this process is not managed correctly it can "de-rail the whole project”.

“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,” Darlow said.

The firm added, however, for schemes with specific fact patterns, these kind of bulk annuities can lead to significant reductions in premium and attractive outcomes compared to the traditional bulk annuity market.

Despite a seemingly positive year for bulk annuities in 2014, research last year found total bulk annuity business fell by 58.9 per cent in Q3 2014.

Figures from Aon Hewitt last year showed total business in the third quarter dropped to £1.6bn from £2.53bn in the second quarter.

There were a total of 39 cases written in Q3 2014, compared with quarter two when a total of 44 cases were written.

Aviva was the market leader over Q3 by volume, driven by the £300m pensioner buy-in in July with the Interserve Pension Scheme. This was Aviva’s largest transaction since 2008.

However, Legal and General and Pension Insurance Corporation remained the market leaders over 2014 with market shares of 40 per cent and 23 per cent respectively.

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