Smaller pension funds, which ultimately lead to a lower pension annuity income, are in the spotlight.
Whilst some firms continue to drag their feet when it comes to pension annuity transfers others are looking at ways of serving consumers better, and part of this is that 16 providers are now on board the Association of British Insurers’ (ABI’s) Options initiative, which has actually slashed processing times to eight calendar days.
Other companies, the likes of Scottish Widows and Zurich, should follow suit as soon as possible or at least they should admit they are putting commercial interests before those of consumers.
However, there are firms looking to go that bit further, particularly to help consumers with smaller pension funds, who currently struggle to get decent advice, and lock into better annuity rates. one of these is Aviva, which is considering selling other providers’ pension annuity products alongside its own.
The reason for all this is that we know that about 60% of retirees are buying a pension annuity with their existing pension provider and that the vast majority of them are missing out on a far better annuity rate by not shopping around. In addition, Aviva says the fact smaller funds are uneconomical for advisers to deal with is a major reason, and that is why it is looking into tackling this advice shortage by offering other providers’ pension annuity rates when it cannot beat the market. Their marketing head, Darren Dicks, stated that the vast majority of retirees have what many advisers believe are uneconomical sized funds pots and there is therefore a shortage of advice.
He added that Aviva have a range of options open to them, one of which is a third-party solution to offer other providers’ annuities where they cannot offer a good rate. They could do this themselves or they could do it with an already established firm. Aviva will put more meat on the bones shortly but in the meantime Ernst & Young’s Malcolm Kerr has welcomed the idea, saying that smaller funds, in particular, need the best possible pension annuity rate and it is unlikely that Aviva is always able to provide that rate.
Another idea to be launched this September is to be called the Annuity Clearing House (ACH), through an IFA firm and with Prudential, L&G and MGM Advantage. It will offer conventional annuities and with-profits annuities as well as impaired and enhanced annuity products. The idea is that advisers will complete a medical form for their particular client either on the ACH website or over the telephone. Apparently, the top annuity rates are instantly generated with a single electronic application form. Interesting to see how this works.
