The Association of British Insurers has started to publish annuity tables, with some interesting results
Annuity rate league tables now regularly appear in newspapers and on websites. They can be a starting point if you are thinking of converting your pension pot into a retirement income. However, the tables are generally of limited use. For example, many life companies that are not actively seeking annuity business do not supply rates and the tables themselves cannot cover all the options available.
The Association of British Insurers (ABI) has now attempted to address these issues with its own annuity tables, drawn from 27 member companies’ data. The tables are not real time and show rates for 12 fictional customer profiles, all based on age 65. As the ABI says (in bold) “The rate which will apply to your personal circumstances will be different.” Nevertheless, the tables do serve one purpose: they underline the importance of shopping around for the best annuity rate.
Take, for instance, the ABI’s first example of a Manchester resident aged 65 with no health problems, wanting to spend £18,000 on an annuity with no dependant’s benefits. The best rate is £1,099.92 a year, while the worst (from a major bank-owned insurer) is £839.52 – nearly a quarter less. Assume the Mancunian’s health is very poor and the range widens to between £1,778.23 and £1,213.59.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
20th September 2013