The Association of British Insurers is mulling ways of including differences in the costs of taking out an annuity where sales are either advised or non-advised sales in its recently-launched Annuity Window, following feedback from users and in the media.
In a blog post responding to feedback following the window’s launch, Yvonne Braun, the ABI’s head of savings, retirement and social care, acknowledges the tool’s tables “are not comparing like with like”.
In particular, she admits the tool does not explain the difference between fees and commission or between advised and non-advised sales more generally. She adds that external providers “on the open market” were effectively providing a “factory gate” price, but that such an “adjustment” had not been made for “internal-only” sales.
She writes: “No commission or adviser charge is incorporated into the published rates of external providers, because we asked those annuity providers who compete on the open market for their ‘factory gate’ rate; no such adjustment has to be made for internal sales. It means the tables are not comparing like with like, but this is a necessary trade-off.”
Internal annuity sales may appear more expensive than their external counterparts because they would not have had any attached fees or commission stripped out of their prices.
Ms Braun says the ABI had not yet made any changes to rectify these issues but that it was aware of the feedback and “would welcome views”.
She says the association has already made a number of changes in the two weeks since the initial launch, including “adding detail to the assumptions we make, linking to information about all options at retirement... and explaining terminology through pop-up boxes and more links to a glossary”.
Ms Braun states: “It could never be a ‘silver bullet’ that makes all consumers take optimal decisions at retirement, but is a further important step in building consumer engagement, understanding and trust. And it seeks to steer customers towards, not away from, advice and other sources of help.
“We chose to vary three factors in each survey, to allow comparison between types of product and the factors that affect price. For the first survey we chose three factors that make a big difference and affect a lot of people’s rates: single or joint life, health and postcode.
“Other factors are very important too – age, escalation, other death benefits, fund size – and future surveys will use different combinations of factors, as well as different health conditions and different postcodes.”
The Annuity Window launched on 22 August and included standard rates from 18 ABI members, based on data gathered from all 27 members that provide annuities.
The figures reveal that for a 65-year old with a £18,000 pension pot, the best rate available is from Reliance Mutual which will pay an annual rate of £1,099.92. The Hbos group, including Scottish Widows, Clerical Medical and Halifax, will pay the lowest rate of £839.52.
