“Sometimes the best option can involve staying with their provider if there are guaranteed annuity rates on offer,” says Dean Mirfin, group director at Key Retirement Solutions. “Taking advice is important.”
But Alan Higham, chairman of Annuity Direct, warns that usually they should twist and not stick. “But around one in seven customers has some form of valuable guarantee or a penalty in the small print of the policy that may mean staying with the current provider is the right thing to do or else waiting until a different time to move.”
When the time comes, annuities are a Byzantine beast and advice is important. Around a third of people do not shop around, according to the Association of British Insurers.
To ensure an annuity meets a clients’ needs, after a full fact-find including the value of their pension fund from their provider and any details of guaranteed rates available, Mr Higham explains that an adviser can ask all the insurance companies who are competitive for a quote.
He stresses that it is important to ensure you get full details of the client’s medical and lifestyle as annuity rates can vary hugely.
“Avelo and Assureweb pricing portals have all the main insurers’ standard annuity rates online. Underwritten annuities are not yet fully available online. Some rates quoted are illustrative based on assumed medical conditions.”
He says that to secure a guaranteed underwritten annuity quote, a standard medical questionnaire signed by the client must be sent. “Be careful using online portals of which there are many as the rates are often not guaranteed or are not quoted from the whole of the market,” he adds.
Annuity rates are guaranteed for around two to three weeks usually, after which the rates will have moved and the client might gain or lose as a result. Over the last 20 years, with a few periods of exception, rates have generally gone down.
If the client regrets purchasing an annuity, they have a cooling off period of 30 days in which to do something about their regret. “After that,” says Mr Higham, “they are stuck with them for life.”
