Providers have been playing fast and loose with annuities

But when things went too far, various prohibitions emerged against excessive rates of interest that took advantage of the poor.

The next big thing was insurance: those with money making a living out of taking on the risk of something going wrong. The earliest business insured hulls and loads against the significant losses that merchants could incur if something went wrong while shipping valuable cargo. This principle was then extended to insuring lives against the significant losses that could arise from the death of an individual.

Yet excess and greed once gain became a hallmark of the market, and law was enacted to introduce the concept of insurable interest to prevent anyone from profiting from the death of strangers.

It is no coincidence that annuities are provided by long-term life assurance businesses rather than the short-term Lloyds insurance markets that cannot insure long-term liabilities. It is also no accident that the capital requirements for annuity providers offer a high degree of security for their annuity payments.

But excesses and injustices in the annuity market have been reported consistently over a long period. Perhaps we should not have been so surprised when the government stepped in to protect the public.

Perhaps we should not have been so surprised when the government stepped in to protect the public.

Taking commission charges, which reduce annuity income when the business is done direct, is offensive. Quoting one rate in annuity tables on which the public relies and then giving better rates to those who know how to haggle is offensive. Not making clear you do not want annuity business and are only quoting rates because you have to without telling the unsuspecting public that the rates are depressingly poor and they would do much better elsewhere is offensive.

And so, maybe precisely because financial services companies have played fast and loose with their customers, we now face no obligation to buy annuities. This plays to the psychology that no one in this liberal society likes being forced to do anything at all, but in doing so we run the risk of losing sight of the spectacularly simple and effective principle of insuring against living too long.

And now we increase the risk that those who cannot help themselves making excessive profits will develop an unhealthy interest in investments pretending to be low-risk and guaranteed, which are nothing of the sort.

Gill Cardy is network development director of ValidPath