The Association of British Insurers is launching an initiative to help retiring pension investors get the best possible deal when they come to draw a retirement income.
The new Annuity Window is compulsory for all ABI members selling annuities to the public and will feature rates from 24 companies, including those which do not currently compete for annuity customers on the open market.
Tom McPhail, head of pensions research at Hargreaves Lansdown, says: “This is a welcome development. With the demise of guaranteed final salary pension schemes, millions of people now have to rely on their private savings to deliver a decent standard of living in retirement. It is highly unlikely that their existing pension company will offer them the best deal, so shopping around is absolutely vital. Pension savers have to make sure that they get the best possible annuity and even consider whether they want to buy an annuity at all.
“Over time, this Annuity Window will allow us to track the competitiveness of different pension companies’ annuity offerings and to identify those companies which consistently fail to come up to scratch. The ABI should be applauded for taking this initiative, however there is still more work to be done to make sure every defined contribution pension investor quickly and easily shops around for the best deal as a matter of course.
“The process which launches pension investors into their retirement still makes it too easy for savers to end up buying the wrong type of retirement income. More work still needs to be done to simplify the retirement process and to steer investors towards a comprehensive shopping-around solution.”
The difference between the best and worst standard annuity rates is typically around 12 per cent.
Some 56 per cent of annuity investors now qualify for some form of enhanced annuity when using a comprehensive shopping around service.
The five most common factors featuring in enhanced annuity searches are:
• Hypertension
• High cholesterol
• Height and weight factors
• Smoking
• Diabetes
A smoker with high blood pressure and cholesterol readings could qualify for an increase of 47 per cent in their retirement income.
