PensionsMay 7 2013

Annuity choice limited despite OMO push

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Retirees are faced with a limited choice of annuity providers despite recent moves from the Association of British Insurers (ABI) to encourage shopping around, according to research by Money Management.

According to the latest survey of annuity providers, despite the huge number of pension providers – many of which offer uncompetitive rates to existing customers only and do not compete in the open market – only 14 firms offer rates to external customers.

Of the providers in the survey, eight offer conventional annuities and nine offer enhanced annuities. Of those, just four offer a choice of both: Aviva, Canada Life, Legal & General and Prudential.

The annuity industry is showing signs of a shift towards enhanced annuities, with an increased focus on more detailed underwriting to assess risk on an individual basis.

Issues remain around those with smaller pots. The smallest size accepted in the survey is £1,000 from L&G, with minimums more typically around £5,000 or £10,000. Many providers will accept smaller amounts from existing customers, although the merits of receiving an income of several pounds a year is debateable.

The survey also highlighted disparities around the rates offered by annuity providers through advised and non-advised routes. Some providers, including L&G and Standard Life, said rates offered through each channel would not necessarily be the same, even if the commission and adviser charge were identical in value.