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Pension pledge lasts just one day

Advisers have hit out at Standard Life for guaranteeing annuity quotes on its own policies for only one day compared with an industry average of two weeks.

Hargreaves Lansdown says it believes the one-day guarantee leads to policyholders being pressurised into a Standard Life annuity and has significantly contributed to the company’s high internal vesting figures.

Interim results released last August show that 91 per cent of Standard’s annuity sales came from customers with maturing Standard Life pensions, with 95 per cent in 2007.

Currently, 50 per cent of Prudential’s annuity sales come from its internal book, 35 per cent of Legal & General’s and 57 per cent of Scottish Widows’ annuity sales. Axa, Scottish Widows and Prudential guarantee internal quotes for two weeks while Norwich Union policyholders are guaranteed their quote for 10 days.

Standard Life guarantees quotes to external pension pol- icyholders for 14 days.

Internal customers get a wake-up pack three months before retirement and a projected maturity value six weeks before retirement which asks the client to call Standard Life to talk through their options. The quote is then given on the retirement date and is guaranteed for one day.

Hargreaves Lansdown pensions analyst Nigel Callaghan says: “Standard Life has a really slick, well-prescribed sales process so when existing investors’ pensions mature, they are converted into annuities like lambs to the slaughter. The fact 91 per cent of annuities were sold to existing pension policyholders is great news for shareholders because if you can sell something at a relatively poor price you increase margin.”

Informed Choice joint managing director Martin Bamford says: “This is a treating customers fairly issue and, depending on how Standard Life handles it, could be another PR disaster.”

Standard Life head of pensions policy John Lawson says: “The process we follow is treating customers fairly with bells and whistles. It gives customers plenty of time to consider their options.”

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Whether pension reform succeeds or fails will be measured mainly by how many people opt out of automatic enrolment. However good the legislation and the compliance getting employers to carry out their duties, it all boils down to whether people remain an active member of a pension scheme and save for their retirement. It is fundamental that we get the culture surrounding saving spot on.

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