Thursday 16 May 2013

Billy Burrows: Cheap is not always best for annuities

" I recently read that Tesco is entering the annuity comparison market. This provides me with the perfect opening comments.

Many commentators and annuity broking businesses view the annuity market in terms of lots of people with small pension pots who need to be sold the annuity which pays the highest starting income.

 It is hard to argue with the numbers; over £13bn of annuities are sold every year and the average purchase price is still less than £30,000.

It seems that Tesco and other firms who know a lot about retailing are aiming for this mass market.

But what about those who prefer to shop in more upmarket supermarkets where price is not necessarily the main driver and where personal service and quality are important factors. Where can they go to get advice on their annuities?

This brings me on to the theme of a paper which I have recently published in conjunction with MGM and Prudential and with help from Professor John Maule, a leading authority on behavioural economics.

The paper argues that it is time to question whether the traditional guaranteed annuity should remain as the default option for those with above average sized pension pots."


 To read the full article, click here and you can also download the report Annuities at a tipping point.

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