The annuity market probably became of age by about 2005 because by this time many companies and some brokers were offering online annuity quotes. This, coupled with much easier processes for applying for enhanced annuities from companies such as Just Retirement, made it much easier for advisers and customers to shop around for the best annuity rate.
Perhaps the heyday (or low day depending on your point of view) was from 2010 onwards when the marketing for annuities was ratcheted up, especially by the new breed of non-advised annuity brokers. I think a low point was reached soon after 2010 as evidenced by an article in the Telegraph by Pam Atherton, entitled Dodgy Annuity Salesmen 'Should be Hounded Out'.
Take it from me there were dodgy practices at the time. On one hand this did benefit annuitants who obtained higher income from their annuities, on the other hand this set in motion the sequence of events that resulted in the infamous phrase from George Osborne in his March 2014 Budget speech in which he declared that "no one will have to buy an annuity”. The rest is history.
So, what went wrong with the annuity market, and why have some high-profile companies been hauled over the coals for not offering enhanced annuities?
The picture is probably more complex than it may seem because there were many different forces at work, but two things in particular are unique to the annuity market.
The commoditisation of annuities
Increased sophistication in underwriting
The commoditisation of annuities
The catch-all phrase captures the move away from thinking of annuities as being part of a retirement planning process to thinking about annuities as a product in which only price is important.
To keep this simple, most people should think about three key things before they convert their pension pot into income: when is the right time, what type of product and who is offering the best terms.
As annuities were increasingly promoted as a commodity, a lot of people, including annuity brokers, missed out steps one and two and went straight to step three. I often felt like a lone wolf saying: “Before you go shopping you need to know what you are shopping for and when is the right time to buy.” Put another way, someone could get the highest possible annuity income, but that would be little use if it was the wrong solution in the first place.
