News Archive - November 2013
Stop whingeing and think of a solution!
21/11/2013
Another headline slagging annuities this weekend. Having had some minor dealings with a newspaper journalist recently, I have seen at first hand the sort of sensationalist spin that gets applied to stories on this subject.
Firstly, let's face the facts. Pensions can be complicated, but there is an endless amount of information available on the internet for people contemplating drawing a pension. Unbiased information leaflefts are sent out by insurance companies when consumers ask for a retirement quotation. They also have the option of using a financial adviser. So if they choose not to avail themselves of information or advice, who is to blame?
The newspaper story implied that it was a kind of industry secret that enhanced annuity rates are available for smokers and people with health problems. It stated that around 70% of men aged 60 to 69 have health conditions that would qualify them for an enhanced annuity rate. The article said that these health conditions would get them a 25% better annuity rate 'on average'. Finally it reckoned that 40% of annuitants were being incorrectly 'directed' into standard annuities.
This telling of the story perpetuates the conception of insurance companies as sharks who prey on vulnerable folk. Surely anybody drawing a pension would be prudent to research or check up on the options for themselves?
Having dealt with enhanced annuities for several years, I can confirm that the average enhancement for a consumer is way below 25% of the best standard annuity rate. In many cases I have seen only one insurer offering an enhanced rate for a minor condition (eg high cholesterol) - in these cases the enhanced rate offered can be lower than the best standard rate. I suspect that these 'borderline enhanced' cases make up a fair percentage of the 70% figure quoted in the reserach.
The enhanced annuity providers are always very keen to attract business, so their literature stresses that a wide range of conditions will qualify you for an enhanced rate. In reality - is a 60 year old with high cholesterol who takes a statin likely to have a shorter lifespan than a 60 year old with no cholesterol problems - bearing in mind that their cholesterol might never have been checked? Probably not - so why would an actuary offer them a 25% higher annuity rate?
Anyway, I have a solution for you. All annuitants have to fill in a short medical questionnaire when they apply to their pension company for an annuity. If the info provided suggests that they might qualify for an enhanced annuity rate, they are instructed to contact a financial adviser to receive full advice on their options.
The upshot of this? Well, it would take a bit longer for people to draw their pensions. It would increase business for advisers.And another knock-on effect would be that standard 'healthy' annuity rates woud get even worse - due to the lack of poorly people subsididing ther rates. But there would still be a fair percentage of people who would choose to ignore this option and just stick with their existing pension provider.Why? Because some people don't trust advisers. Some people hate forms and paperwork. And some people just can't be bothered.
And that's fine! It's a free country. But please - bear all this in mind when you are reading the doomsday figures in the next tiresome press article about annuities.
Please contact Mulberry Financial if you want to speak to an 'annuity salesman' - sorry - 'independent financial adviser'.
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