Row grows over fresh annuity confusion

New insurance industry tables will simply help to confuse people

The insurance industry's attempts to improve the way it sells annuities have led to a storm of protest this week. Critics have warned that new annuity tables will mislead rather than help consumers and leave them potentially thousands of pounds worse off.

Annuities are insurance policies where you use your lump sum to buy an income for life. But for years pension companies have encouraged their savers to buy annuities from the same company they saved up with, even though they could very often have got a much better deal elsewhere. After waves of criticism, the Association of British Insurers – which represents the big life and pension giants – agreed new rules earlier this year that forces pension providers to issue an information pack to customers before offering them an annuity.

Insurers should now explain to people that they can shop around for an annuity and may get a better price. They should also explain about enhanced annuities, which pay out more if you have certain medical conditions or smoke.

The latest part of this process was the publication this week of tables of different annuity prices by the ABI. For starters, it confirmed what experts have always known, that there's a massive difference between the best and worse rates paid by insurers. According to the ABI's table, the difference is 31 per cent, with Reliance Mutual offering the top rate and Scottish Widows the lowest, based on a level annuity for a 65-year-old man living in Manchester. But apart from the shock of seeing how much of a rip-off some annuities seem, the chief complaint is that the tables are out of date and inadequate.

Laith Khalaf of Hargreaves Lansdown said: "The rates are several weeks old, and there are only a limited number of examples which don't take into account anyone's individual circumstances precisely, or the type of annuity they want."

The table only lists ABI members – so Hodge Life, which is not a member of the association, won't be included even though the firm currently offers the best rates for a healthy non-smoker with a modest pot.

"Anyone relying on the ABI's tool are still likely to make poor decisions," warned Alan Higham of Annuity Direct. "The table degenerates the important choices at retirement into buying the cheapest annuity."

Otto Thoresen, the ABI's director general, said: "The industry is determined to do all it can to help people make the right decision to secure the best possible pension."

But Mr Higham said the ABI would be better telling people to get expert help. "One can't reasonably expect the ABI to do anything other than to safeguard its members' interests," he said.

"But if everyone coming up to retirement spoke to a good financial adviser, there'd be a big hole in the estimated £1bn wasted each year at retirement. That money by and large goes to prop up the profits of life insurance companies."

Suggested Topics
News
people'It can last and it's terrifying'
Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
peopleA spokesperson said the support group was 'extremely disappointed'
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
News
i100
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
The eyes have it: Kate Bush
music
News
i100
Life and Style
tech

Apple agrees deal with Visa on contactless payments

Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

    £40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

    SQL DBA/Developer

    £500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

    .NET Developer

    £650 per day: Harrington Starr: .NET Developer C#, Win Forms, WPF, WCF, MVVM,...

    Java/C++ Developer

    £350 - £375 per day: Harrington Starr: Looking for a Java/C++ Developer to wor...

    Day In a Page

    Alexander Fury: The designer names to look for at fashion week this season

    The big names to look for this fashion week

    This week, designers begin to show their spring 2015 collections in New York
    Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

    'I like Orwell's writing as much as the next talented mediocrity'

    Will Self takes aim at Orwell's rules for writing plain English
    Meet Afghanistan's middle-class paint-ballers

    Meet Afghanistan's middle-class paint-ballers

    Toy guns proving a popular diversion in a country flooded with the real thing
    Al Pacino wows Venice

    Al Pacino wows Venice

    Ham among the brilliance as actor premieres two films at festival
    Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

    Neil Lawson Baker interview

    ‘I’ve gained so much from art. It’s only right to give something back’.
    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
    Fashion walks away from the celebrity runway show

    Fashion walks away from the celebrity runway show

    As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
    Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

    Meet the stars of TV's Wolf Hall...

    ... and it's not the cast of the Tudor trilogy
    Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

    Europe's biggest steampunk convention

    Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
    Don't swallow the tripe – a user's guide to weasel words

    Don't swallow the tripe – a user's guide to weasel words

    Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
    Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

    Daddy, who was Richard Attenborough?

    The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor