American investment and insurance group the Hartford has announced that it is withdrawing from the UK variable annuity market and closing its London office with immediate effect, as a result of current and forecast market conditions.

Ramani Ayer, chief executive officer and chairman of the group, said that financial markets remain difficult and the outlook for the economy is uncertain.

"In light of these conditions, even as a well capitalised company, we are taking additional measures. We are considering a range of potential options with the goals of preserving capital, stabilising ratings and reducing risks," he said.

However, fears that the move signal serious problems for the 'Third Way' retirement product market have been tempered by the industry.

Retirement planning specialist, Intelligent Pensions, is optimistic on the outlook for variable annuities: "Having spoken with some of the key players I do not believe that Hartford's move will mark the beginning of the end for Third Way annuities," said David Trenner, technical director at Intelligent Pensions. "It is clear that potential new entrants to the market such as Standard Life will not be rushing in because they are simply not big enough. They cannot run their own hedging, and they will struggle to obtain reinsurance.

"However, firms like MetLife and Aegon who have recently increased their charges for guarantees will continue to be active in the UK as will Lincoln who sell Third Way products through a UK subsidiary which is not dependent on the parent for financial support, has good capital reserves and a sound and prudent risk management framework in place," he concluded.

- Pensions Age May 2009

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