‘Focus on single life annuities is putting partners at risk’

The independent pensions consultant said the annuities market benefited brokers and providers, but not their “poorly-informed customers”. She added that changes were needed to focus on the choice of the right product instead of the best rate as promoted by the open-market-option, .

Approximately 80 per cent of the 425,000 annuities sold each year were single life products and the former director general of Saga Group claimed that more than a 250,000 widowers and widows every year were at risk of losing their partners’ pensions if they died due to to a lack of education on the types of annuities available.

Ms Altmann said: “The UK annuity market is set to betray thousands of people as most don’t understand how annuities work. Having saved for decades, if they buy the wrong product their partner will be left with nothing when they die while the insurer pockets most of their pension fund.”

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She added that women in their 50s and 60s were particularly at risk as they were least likely to have their own pension.

Ms Altmann said: “All the emphasis of annuity reform has been on encouraging people not to just accept the annuity offered to them by their pension company, and to shop around for a better rate.

“But this is not good enough. Just going to an annuity broker and obtaining a better rate may be better than nothing, but will not be the best for the customer. They need help finding the right product first. Advice is crucial to help people understand the implications of annuity purchase.”

Example annuity rates

Level-term single life annuity

Annuity providerRankYearly income for 65 year old
Legal & General1£6025.80
Canada Life2£5766.84

RPI-linked single life annuity

Annuity providerRankYearly income for 65 year old
Standard Life1£3634.80
Legal & General2£3531.72
Canada Life3£3286.20

Source: The Annuity Bureau, 1 August 2013

Provider View

Simon Briggs, senior technical manager for The Annuity Bureau, said: “If someone is left to their own devices, they are bound to have an inclination to chase the highest income available. This is where an adviser comes in; where they look specifically at a person and their spouse’s circumstances.”

Adviser View

David Gibson, director of County Londonderry-based Gibson Financial Planning, said: “Providers make it far too easy for people to sign on the dotted line without exploring the options that are available. For many people annuities are not even the best option which makes seeking out advice first very important.”