14 February 2014
Today the FCA has published the findings of its thematic review into annuities, which shows that savers are worse off due to a failing and out-of-date annuities market.
The review, which began in January 2013, aimed to explore the risk of detriment that consumers face as a result of not shopping around when purchasing an annuity.
Nicholas Fitzgerald, Head of Financial Planning for wealth manager Brewin Dolphin, commented:
“It is no surprise that the FCA’s review has concluded that the annuities market is not working. This has been a widespread view for many years and chimes with research carried out by Brewin Dolphin in January, which underscored the disparities in the best and worst deals offered to those purchasing an annuity. We welcome both the FCA’s forthcoming Competition Market Study and the admission by the ABI that the insurance industry could do more to make the market work effectively, but actions speak louder than words. It is essential that we see today’s findings swiftly translate into genuine improvements for savers, and not further complicate an already complex market.”
The results of the thematic review come shortly after Pensions Minister Steve Webb’s recent suggestion that pensioners should be given the power to switch annuities.
Analysis undertaken recently by Brewin Dolphin revealed significant disparities between the best and worst annuities quoted by four of the major pension providers for a typical 65 year old single male.
For example, the difference between the best and worst annuities available to a 65 year old single male with a £300k pension pot and a further 18.3 years to live is £3391p.a. (£17,769 vs. £14,378), which equates to £62k in total.
The difference between the best and worst annuities available to the same male with a £500k pension pot is £5652p.a. (£29,638 vs. £23,986), which equates to £103k in total.
| The difference between the best and worst annuities available for the same 65 year old single male with 18.3 years life expectancy | ||||
| Pension Pot | Best | Worst | Difference per annum | Total difference over 18.3 years |
| £300k | £17,769 | £14,378 | £3391 | £62K |
| £500k | £29,638
| £23,986 | £5652 | £103K |
Note that no special circumstances have been considered, which could make this difference considerably greater.
-ENDS-
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Past performance is not a guide to future performance.
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