The Association of British Insurers’ decision to publish annuity rates from more than 20 firms is welcome news, but the pension industry needs to do more so that consumers get a fair deal.
Annuities have had a tough time lately, with falling rates leading some to conclude that pension savers are doomed to a lousy deal, no matter what they do. To some extent that’s true, but the current climate makes it more important than ever to get the best offer you can.
The Association of British Insurers (ABI), to which most annuity providers belong, has made this easier by publishing comparative rates online. And the simple truth that the ABI’s table lays bare is that someone in good health can be as much as 31% a year better off as a result of shopping around and moving from a poor rate to a good one.
Comparative annuity rates available online
Astonishingly, less than a third of those buying an annuity currently switch providers – suggesting that thousands settle for second (or third) best, accepting a lower retirement income than necessary.
It’s also important to get the right sort of annuity. Less than half of those people who have financially dependent partners buy joint-life annuities, leaving their other half needlessly exposed. And only 16% of those eligible for an enhanced annuity actually end up buying one, missing out on a potential 47% boost to their income.
For all the ABI’s good intentions – and a new code of conduct stating that providers ‘must not sell any product by relying on the customer’s inertia and ignorance’ – the evidence suggests that the pensions industry has been making millions of pounds a year by doing precisely that. Publishing rates is a good start, but it’s only when proper advice and decent outcomes become standard that things will really improve.
If you’ve bought an annuity at retirement, what experience have you had? Have you felt short-changed by your investment? Has the ABI’s move to publish comparative rates given you confidence you’ll get a better deal?