New data published by the ABI – Association of British Insurers, has found that while an increasing number of people are shopping for an annuity, many are still not being offered sufficient enough advice on the subject. The organisation polled 750 retirees and found that just over two thirds had used the open market option when they were looking for an annuity earlier this year. This is higher than the more general, national figure which is more often closer to 40% of annuitants.
However, although these people consulted other insurers, only one third bought an annuity from an alternative pension provider. Nearly fifty percent of those questioned stuck with their incumbent pension provider as they had been offered a guaranteed rate or they believed that their pension fund was too small to bother switching annuity providers. The argument that the annuity information provided by insurers is not up to standard would be backed up by the claim from 20% of those questioned that the information they received was…“…complicated and difficult to understand”.
The survey also unearthed some other well documented problems in the annuity industry, the lack of awareness over enhanced and impaired-life annuities. Of those questioned who could potentially qualify for annuity enhancement, only around half were aware of these more lucrative options. The ABI defended providers by saying that…“…pension providers have made major improvements to pre-retirement communications, to make clear the options available to individuals.” It is certainly true that changes have been made to the wake-up packs but some believe the industry and the government need to go further to make OMO the default option.
However, some from within the industry have questioned whether those who stuck with their current provider were in receipt of all the facts they needed to know before making their decision. Indeed Bob Bullivant from Annuity Direct says that… “…the ceding fund needs proper investigation for GAR/ Extra tax free cash, penalties etc.”
Thirty-three percent of those questioned agreed that an annuity online comparison tool would encourage them to shop between providers. The only problem with this is that a tool cannot give an accurate quote like a car insurance comparison tool, because there maybe finite medical details that need to be known before an accurate best quote can be given. This can only be done by an inquisitive annuity adviser or IFA.
