by Dr. Ros Altmann
(All material on this page is subject to copyright and must not be reproduced without the author’s permission.)
ANNUITIES – Some examples from the market place today.
For a £10,000 pension pot, best rates quoted for male, age 60 , level annuity, no guarantee
£739.12 p.a. (equivalent to 7.39% return in first year)
For a £100,000 pension pot, best rates quoted for male age 60, level annuity, no guarantee
£8019.00 p.a. (equivalent to 8.02% return in first year)
This suggests that those annuitising small amounts do, indeed, get worse value than the better off.
Difference between the best rate and the 10th best rate for male age 60 is 10.7% p.a. (for the £100,000 pension, the person gets an extra £15per week, just by getting the top rate, rather than the tenth (and there are many more than ten providers, so the lowest rate is much worse than this).
Difference between the best rate and the 10th best rate for female age 60 is12%.
For male age 65, difference between top and 10th best is 10.8% and for female age 65, difference between top and 10th best is 15%!
A female with a £100,000 pension pot who takes the 10th best, rather than the best rate will have £21.50 less per WEEK, every week for the rest of her life!! And with worse rates, the weekly income lost is even greater. Can this really be acceptable, when the person is forced to buy and can never change!? Some quick basic advice would raise pensions straight away, just by shopping around. People do not know how to do this themselves and education, FSA booklets or information will not help those retiring today, tomorrow, next week or next year. It will take a long time, but people are not going to wait, they need to have their pension to live on and will buy the wrong annuity.
How can we be happy with this? What is stopping the Government from getting these people better annuities?