Pensions  

Specimen rates for annuities reveal huge disparity – ABI

Highlighting the importance of shopping around for the best annuity deal, the ABI has published a list of specimen rates from 18 of its members. The statistics, based on a 65-year-old man with an £18,000 pension pot, revealed that Reliance Mutual offered the best annuity rate at £1099.92.

Dubbed the annuity window, the list is part of the ABI’s retirement choices code which was launched earlier this year to help people approaching retirement with their options. It was aimed to assist shopping around for the best annuity for their circumstances, including people who may qualify for an enhanced annuity.

The specimen rates will be updated regularly by the ABI.

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Top three annuities providers Rates
• Reliance Mutual£1099.92
• Reassure £1092.36
• Aviva£1080.36
Bottom three annuities providersRates
• Wesleyan Assurance Society£905.16
• NFU Mutual£890.76
• Scottish Widows / Clerical Medical / Halifax £839.52

Otto Thoresen, director general of the ABI, said: “Increasing life expectancy and an era of low interest rates makes the need to secure an adequate retirement income greater than ever.

“The industry is determined to do all it can to help people make the right decision to secure the best possible pension. The retirement choices code will help people approaching retirement to have the confidence to make the right pensions decision.”

Industry responses

Andrew Megson, managing director of retirement for Partnership, said: “We welcome this move as it clearly highlights the value of shopping around.

“Our own analysis also revealed that more than 50 per cent of 65 year olds have a health or lifestyle condition that could make them eligible for an enhanced annuity. However in 2012 just 4 per cent of people who took out a product with their existing pension provider choose this type of annuity.”

Vanessa Owen, head of annuities and equity release for LV=, said: “We welcome any tool that helps people to better quantify the value of shopping around.”

Adviser View

Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown, said: “Millions now have to rely on their private savings and it is highly unlikely that an existing pension company will offer a customer the best deal, so shopping around is absolutely vital.

“In 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.”