There is a 24 per cent difference between the highest annual income available for a standard annuity on an £18,000 pension pot and the lowest, data from the Association of British Insurers reveal.
Of its 27 annuity provider members, the ABI has listed ‘sample’ rates from 18 in an attempt to offer greater transparency on the market rates available.
The figures reveal that for a 65-year old with a £18,000 pension pot, the best rate available is from Reliance Mutual, which according to the figures will pay an annual rate of £1,099.92. At the other end of the scale, the Hbos group, including Scottish Widows, Clerical Medical and Halifax, will pay the lowest rate at £839.52.
According to Hargreaves Lansdown, supplying information to the ‘window’ is compulsory for all ABI members selling annuities to the public, including those which do not currently compete for annuity customers on the open market.
The ABI is currently only presenting rates from 18 of its members, with many being left out because they do not offer a relevant product for comparison or because they offer rates from other providers. Among those not covered are Fidelity, LV= and MGM Advantage.
The rates for those covered in the data set are detailed below:
|Legal & General||£1,069.92|
|Scottish Widows/Clerical Medical/Halifax||£839.52|
|Sun Life of Canada||£979.24|
|Wesleyan Assurance Society||£905.16|
The figures also reveal the importance of shopping around for an enhancement if the customer has a qualifying lifestyle condition, with the highest possible annuity rate more than doubling to up to around £1,800, the ABI said.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “Over time, this Annuity Window will allow us to track the competitiveness of different pension companies’ annuity offerings and to identify those companies which consistently fail to come up to scratch.
“The ABI should be applauded for taking this initiative, however there is still more work to be done to make sure every defined contribution pension investor quickly and easily shops around for the best deal as a matter of course.”
“The process which launches pension investors into their retirement still makes it too easy for savers to end up buying the wrong type of retirement income. More work still needs to be done to simplify the retirement process and to steer investors towards a comprehensive shopping-around solution.”