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apart from the shock of seeing how much of a rip-off some annuities seem, the chief complaint is that the tables are out of date and inadequate.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."
10 tips for taking out a personal loan
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Pension firms must ask consumers more questions, says City Watchdog
Money Insider: Smart alternatives to the pensioner bond
- 1 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 2 Dog thinks owner is drowning in lake, dives in and tries to pull him out
- 3 Thank heavens for Louise Mensch and her foul-mouthed tweets to world leaders
- 4 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 5 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
Leaked documents show Ukip leaders approve NHS privatisation once it becomes more 'acceptable to the electorate'
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village