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apart from the shock of seeing how much of a rip-off some annuities seem, the chief complaint is that the tables are out of date and inadequate.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."
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Orgasm machine to deliver climax at the push of a button
- 3 Teacher shows sex tape featuring herself to pupils during class by mistake
- 4 Singapore sting: Sky-high prices are pushing locals to the edge of affordability
- 5 Liam Neeson turned down James Bond role because late wife Natasha Richardson said she wouldn't marry him if he took it
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
White people become less racist just by moving to more diverse areas, study finds
Exclusive: Impact of immigrants on British workers ‘negligible’
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
Day In a Page
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew