Big UK insurance companies offer up to 30% below best market deals for pensions who convert savings to life-time annuity; even ABI director general shocked by differences
Consumers need to shop around before choosing an annuity and not just automatically stay with their current pension providerConsumers are constantly being reminded to shop around, especially before choosing any financial products, but the widespread differences here highlight just how important it is for another retiring, or approaching retirement age, to shop around before committing. Industry commentators have noted that consumers almost never get the best deal by remaining with their current pension company. Furthermore, consumers are advised to seek independent advice before opting for an annuity at all, some of which are offering just 3% or less for a 65-year-old person with a life expectancy of 25 years.
Many consumers unaware that the capital does not automatically transfer to partners on death and risk losing large sums because of this. Another pitfall facing those with annuities or considering moving to one is that the main capital does not automatically transfer to the pensioner's partner after death. He or she must specifically request this to happen.
Market leader Hodge Lifetime not included in table as it is not an ABI memberAlthough there have been some complaints that the ABI's annuity table does not include some of the best performing products, as the companies offering them, such as Hodge Lifetime, are not members of the association, it does give consumers the tools to make a much more informed decision about which annuity, if any, might suit them best.
Scottish Widows / Clerical Medical / Halifax offered worst ratesThe table uses figures for 12 different customer profiles and the sums quoted are based on the prices that were offered two months ago. They reveal that well-known provider Scottish Widows / Clerical Medical / Halifax offered by far the worst rate, providing just £839.52 in annual income to a single 65-year-old with no health problems, living in Manchester, who invested £18,000. Other poor performers included NFU Mutual, providing £890.76 annually, Wesleyan Assurance Society paying £905.16, Phoenix offering £910.00 and Abbey Life giving £910.16.
Reliance Mutual offered best rates, closely followed by ReassureReliance Mutual topped the scale, offering the same pensioner £1,099.92 each year, closely followed by Reassure on £1,092.36. Aviva also performed well, providing £1,080.36, as did Canada Life, offering £1,077.24 annually. However, someone who had smoked for over 10 years could get a higher income, £1,700 in the case of Reliance, due to having a shorter life expectancy. While the table could certainly be a useful starting point for the 420,000 new customers looking for annuity products each year, it does not replace independent advice that is tailored to each person's specific circumstances. As it only includes ABI members, consumers do also need to look at other companies' performance.
For further information, visit the ABI site at https://www.abi.org.uk/Insurance-and-savings/Products/Pensions/Annuity-rates/Example-rates