Online annuity brokers can fail to offer best deals
Shopping around through one of the growing number of online annuity brokers could mean you miss out on the best rates, warns specialist retirement adviser Key Retirement Solutions.
KRS says many brokers use a 'panel' of selected providers, rather than checking the entire market for the best deals, including enhanced annuities for retirees in poor health.
As a consequence, although consumers are likely to improve on the annuity income they would have received if they had stayed with their pension provider, they may not be maximising their potential retirement income.
The KRS analysis of 50 top online annuity brokers shows that 24%, including Nationwide Annuities, JLT and Saga, work on a panel basis. The websites of a further 11 brokers don't make it clear whether they offer a restricted range or whole of market choice.
On the average pension pot of £39,700 being invested through these brokers, KRS estimates there could be a difference of as much as £450 a year between a so-called "better' deal and the actual highest available.
Dean Mirfin, group director of KRS, which does offer a whole of market service, says there's been a rapid growth in the number of online annuity brokers in the market, and increasingly they use "clever semantics" on their websites.
"There's been a big increase in the use of the word 'better', rather than 'best', and consumers don't necessarily pick up on the difference," he explains. "These brokers justify their position by saying they regularly review rates and ensure the bulk of competitive rates are offered.
"But we say it is vital that all pensioners secure the best possible rate on their funds. Why do brokers offer a narrow panel of providers? Revenue is likely to play at least some part in it."
Mirfin points out that any "whole of market" service must include rates from Aviva, Canada Life, Hodge Lifetime, Just Retirement, Legal & General, LV=, MGM, Partnership, Prudential, Reliance Mutual, Scottish Widows and Standard Life.
A good place for annuity purchasers to start is with the Association of British Insurers (ABI) comparison tables for various profiles of consumer, with sample rates from more than 25 leading annuity providers to show pensioners how much better off they could be by shopping around.
This article was written for our sister website Money Observer
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.