Based in the UK, Retirement Advantage was created in 2015 when funds managed by TDR Capital merged the retirement income and equity release divisions of MGM Advantage and Stonehaven.
The company has over 30,000 pension and equity release customers with a total of £2bn ($2.56bn, €2.17bn) in assets under management, £1.5bn of which sits in a block annuity deal.
The deal allows Canada Life to expand into offering equity release mortgages and “reaffirms the firm’s commitment to the United Kingdom,” said Paul Mahon, president and chief executive of Great-West Lifeco, international financial services holding company that wholly owns Canada Life.
Commenting on the agreement, Retirement Advantage chief executive Craig Fazzini-Jones said it provides its clients with “greater retirement protection”.
The transaction is expected to close in the fourth quarter of 2017 and is subject to customary regulatory approvals and certain closing conditions.
Regulatory approval is likely to take between three and six months, during which time “it will be business as usual for the companies and their customer service,” Canada Life said in the note.
A less crowded market
The news brings the number of annuity providers active in the UK market down to six. These are Aviva, Canada Life, Legal & General, Scottish Widows, Hodge Lifetime and Just Retirement.
“Another annuity provider bites the dust, as the impact of the new pension freedoms continues to be felt,” Nathan Long, a senior pension analyst at Hargreaves Lansdown, commented.
Long reflected on the fact that a shrinking market means the competition between annuity providers is dwindling, with potential disadvantages to clients.
“We have not seen Retirement Advantage offer particularly competitive annuity rates for some time, so whilst we don’t expect annuity rates to be impacted in the short term, it is still disappointing that another provider has left the market and long term this cannot help competition, something we know the FCA is currently concerned about.”.
However, Long conceded that “Retirement Advantage’s innovative retirement income solutions could get a new lease of life with Canada Life’s backing”.