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Standard annuities

The article on Standard Life annuities in the February 19 issue of Money Marketing is decep tive on a number of points.

The sub-headline, Standard Life internal annuity conversions at 91 per cent, attempts to suggest that only 9 per cent of our customers exercise the open market option. This is completely untrue. Recently reported ABI figures indicate that, on average, 37 per cent of existing customers of all insurers exercise the Omo.

We do not publish the number of our own customers who shop around because that information is commercially sensitive. However, as one of the biggest players in pensions, it is a fair assumption that Standard Life’s figures have a large influence on the average published by the ABI.

According to the ABI, almost half of annuities bought from the insurer, with which the customer saved for retirement, are for purchase prices of less than £10,000, for which there is either no open market or only a limited one. The same ABI research says that 81 per cent of these customers achieve an annuity rate within 95 per cent of the best open market rate available.

Advisers who track annuity rates will be well aware that Standard Life’s rates for smaller annuities have been, and continue to be, very competitive. For example, a 60-year-old male buying a level annuity today with a purchase price of £9,999 would be only £1 a month, or 2 per cent, better off if he switched from the second-best rate (Standard Life) to the best rate (Legal & General).

At this purchase price and below, the difference is equally negligible for females, joint lives, other ages, whether level or escalating. And in many cases, the best rate on offer is Standard Life’s. External transfers require a 14-day guarantee because of the time taken to obtain the funds from the incumbent provider.

Internal customers of Standard Life do not need a guarantee exceeding one day because we process most instructions to buy an annuity within one day. Perhaps other providers are unable to process internal annuity purchases in such a short timeframe and hence feel the need to offer a guaranteed quote with a longer duration.

John Lawson Head of pensions policy Standard Life

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