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Gap between best and worst annuity rates widens

Hargreaves Lansdown has warned consumers are still being rolled over into annuity products without shopping around, as the latest figures from the Association of British Insurers shows the gap between the best and worst annuity rates has widened.

Data published last week shows the gap between best and worst rates has increased from 31.3 per cent in December to 34.9 per cent in July. 

Hargreaves Lansdown head of pensions research Tom McPhail says: “It is painfully obvious that some companies are making no effort to offer their customers decent value. For investors who do shop around, competitive rates are available, unfortunately we also know that in spite of the recent Budget reforms, investors are still being rolled over into their existing provider’s annuity. What’s more, many pension providers are failing to offer investors a low cost alternative to annuities, such as a drawdown plan.”

Data from IT provider Iress shows sales of advised annuities through its system have fallen 40 per cent year-on-year on the back of the Budget.

Providers have been given the option to offer more flexible annuities in response to calls for Government to ‘tear up the rule book’ on annuities.   

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  1. Is it not a prima facie failure of regulation that the FSA/FCA still obstinately refuses to mandate OM as the default option? Were it to do so, the incidences of people being all but railroaded into poor value annuities would become things of the past. Isn’t one of the FCA’s primary responsibilities supposed to be to protect and to enhance the industry’s reputation?

    And, as ever, what, if any, representations is APFA making to the regulator on this issue?

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