It was interesting to read an article in The Telegraph yesterday, asking whether insurance companies are pocketing £63m a year through the inappropriate sale of standard annuities to retirees in less than perfect health.
The Telegraph investigation found annuity products designed for those with a life expectancy of 93 years old were being sold to pensioners with any form of health condition.
The consequence of someone with any health or medical condition buying a standard annuity product is the loss of income; an average of £450 a year in retirement.
According to the investigation, up to 140,000 retirees a year are caught up in this ‘swizz’.
Because 68% of men aged 60‑69 suffered from a qualifying medical condition, it is likely that a high proportion of those buying an annuity are failing to claim the income they deserve.
Annuity products and their suitability are coming under increased scrutiny, with the recent Channel 4 Dispatches programme including the claim that the mis-selling of annuities could be at least as big as the mis-selling of payment protection insurance.
Shopping around is often heralded as important when it comes to buying an annuity. It is not enough.
You need to seek expert independent financial advice to ensure you end up with the most suitable retirement income option for you.
This might or might not be an annuity. If it is an annuity, it should be the most competitive rate for which you can qualify based on your health. It should also contain the relevant options to provide for you and your family in the future.
As simple a concept as an annuity might seem at first glance (you give the insurance company your pension fund, they pay you an income for life), they are really not that simple.
Getting the right annuity requires advice. It is for this reason that we expect the day will soon arrive where some or all insurance companies refuse to do annuity business without the involvement of a financial adviser.
