Little did I know when I chose Peterborough Cathedral as the default postcode for my annuity tables in 2007 that this cathedral city would become the place where I would help run a specialist annuity business.
Peterborough was chosen because it represented a Middle Britain postcode and, judging from the characters I saw in a local hostelry, this cohort covers a wide range of people. I was especially struck by the tattoo on one young lady’s arm which read “trust nobody”.
It seems one of the problems for those approaching retirement is working out who they can trust to help them get the best outcome with their annuity purchase decision.
Judging by the publicity surrounding the ABI Annuity Window launched recently, there are still companies offering customers a very poor deal. But let’s not forget there are some companies offering customers a very good deal. Three companies always appear at the top of the best buy tables – Aviva, Canada Life and Legal & General.
Will customers trust supermarkets to get it right? There is a lot of speculation about a big supermarket entering the annuity market. My only comment is that a supermarket that has only one product on the shelf does not offer any choice.
Perhaps one of the problems with the annuity market is that people are being empowered to shop around for the best annuity but the only metric they know is price. Unfortunately they do not understand value.
Professional advisers are raising their game and providing their clients with more information on the full range of options. Although I observe from close quarters one unintended consequence of the RDR is that NOW many people perceive advice as being complex and expensive (we know that is not necessarily the case), those clients who do get advice are probably getting a better quality service.
Many of the firms offering a guided sale process are also offering their clients a better quality service, with some firms presenting people with a much wider range of options, including with-profits annuities. One of the largest insurance companies also offers its policyholders a with-profits annuity option as well as a conventional annuity option.
In my view, the annuity market has changed beyond all recognition in the last few years. I have not liked all the changes but as the dust settles on the new world, where people are becoming more savvy and are shopping around on the internet and hunting for the best bargain, there are signs that the industry is slowly moving away from considering price as the main factor to considering a better quality service.
Jane Austen is to become the new face of the Bank of England £10 note from 2017 and we do well to remember the words of wisdom she wrote in 1811 in her book Sense and Sensibility: “An annuity is a very serious business; it comes over and over every year and there is no getting rid of it”. Perhaps the problem is most people do not take annuities seriously enough. The industry can do its bit to help by taking the task of communicating the need to take a longer-term view of annuity benefits more seriously.
Billy Burrows is director of the Retirement Academy