For Immediate Distribution
7th December 2010
RETIREMENT solutions specialist Partnership today reveals shattering new data showing UK pensioners are estimated to have haemorrhaged £7 billion in retirement income over the last decade (2000 – 2009, source: PICA/Oxford Economics, December 2010*) – simply because they have not looked for the most competitive annuity rate.
The majority of pensioners – around 70 per cent with pension funds under £40,000 - do not shop around for the best annuity rates (using what is known as the Open Market Option)
The massive amount of income for life is broken down broadly into two categories – those pensioners qualifying for standard annuity rates are estimated to have suffered a loss of £3.8 billion.
And the millions of older people who were eligible for an enhanced annuity rate (those who qualify for more income for a health/lifestyle-related condition) are thought to have lost £3.2 billion.
“All in all this makes for a total loss of £7 billion” said Partnership’s Philip Brown.
“The crux of the matter is simple: pensioners are still failing to shop around for the best annuity rate in retirement, and therefore unfortunately are being consigned to less income for life - despite this being one of the most important financial decisions they will ever make in retirement,” he said.
“And it is not as if pensioners can afford to throw away this vital income – the average retirement income from pensions per year for men aged 60 with no options (i.e. level income on standard rates basis) is now just £2,200 – or £42 per week.
“The real tragedy is that this is just a small part of the total income lost to the oldest people in our communities over the last 30 years.
“This scandal cannot be allowed to carry on unchecked for another decade, particularly as the demographic time-bomb starts to explode. (Over the next 20 years as the numbers of people aged over 75 years to grow by 70% and people aged over 85 years will grow by 60% in the same time period - source: Laing and Buisson, December 2010).
“Buying an annuity at retirement is the only way to guarantee an income for life – and they are not exposed to volatile investment markets,” said Brown.
“What is particularly upsetting is that pensioners cannot afford to lose this income. Every penny lost by them is a tragedy. “And typically it is the poorest and least well off who lose the most retirement income.
These are exactly the people who can least afford least to do so – and they need not do so,” he added.
“At a time when the Government is determined to stop people falling back on to means-tested benefits, we believe it must now insist that pensioners shop around for the best rate not only to help themselves but to protect themselves from falling back on the State.
" I’ * Based ABI figures, Oxford Economics/PICA research, and Partnership’s conservative assumptions.
Facts
• The difference between the best and worst annuity rates can be up to 30% or more for people eligible for an enhancement
• The poorest and least well off lose the most income by not shopping around. Partnership urges the Government not to overlook value of annuities for vast majority of people in retirement, in advance of its publication of proposals from its Scrapping Annuities Age 75 consultation, anticipated this Thursday 9 December. "We support the Government as it seeks to make retirement saving more attractive by providing greater flexibility in how pension income can be invested,” said Brown. “However we urge the Government not to lose sight - that for the vast majority of people annuities can still be the best retirement product. *Work conducted by PICA and Oxford Economics over the last 4 years has demonstrated that shopping around can bring standard annuity rate uplifts of 20% and the 40% of people who are eligible for enhancements for reasons of health or life style conditions can get rates which on average give them 37% up lifts. Partnership assumptions over the last 10 years estimate a staggering £7 billion has been lost. Actual figures could even be higher than this.
• 80% of pension funds are less than £40,000 (ABI 3rd Q 2009)
• 70% of those people with pension funds under £40,000 do not shop around for the best annuity rates (the Open Market Option)
• 40% of people are eligible for an enhancement for reasons of health or lifestyle - yet only 10% shop around for the best annuity rates – Ends –
Media Enquiries:
Philip Brown Head of Retirement Products
07500 104604
Philip.brown@partnership.co.uk
David Andrews
Senior Consultant Director
07941 255855 / 01273 737352
David Andrews Media Ltd
david@davidandrewsmedia.co.uk
About Partnership:
Partnership is a specialist provider of financial solutions for people with health/ lifestyle conditions, as well as those suffering from a serious medical impairment. Partnership was the first company in the UK to offer higher retirement incomes by taking account of people’s health and lifestyle conditions. It has been a consistent innovator developing this sector by championing the needs of those with even modestly reduced life expectancies.
Partnership has led the way in providing products designed specifically for individuals whose health and lifestyle is likely to result in a reduced life expectancy. Partnership is expert in the field of medical underwriting and has a unique in-house data set. Partnership believes that its years of accumulated data and knowledge gives it a unique understanding of the impact of health and lifestyle choices on longevity. This, in turn, enables it to offer the most accurate assessment of a client’s life expectancy and therefore offer the fairest price to them.
Partnership has a comprehensive offering in the retirement sector and offers a complete range of Enhanced Annuity solutions, from clients who smoke or have minor health impairments, through to serious conditions such as cancer. Partnership is the largest provider of annuities for Long Term Care funding in the UK, with 80% of the market, and also offers specialist Protection solutions for clients who have been declined cover from standard providers. Partnership offers a firm commitment to supporting advisers in growing their business.
Partnership was this year’s winner of the 'Long-term Care Provider' award at Health Insurance Awards and won this year’s Simply Biz ‘Annuity Provider of the Year’ award. It has been awarded a 5 Star rating at the prestigious Financial Adviser Service Awards, was judged “Best Enhanced Annuity Provider” at the Moneyfacts Awards and achieved an ‘eee-rating’ (the highest possible) for its web-based enhanced annuity platform in the e-Excellence Awards.
www.partnership.co.uk Partnership is a trading style of The Partnership Group of Companies, which includes Partnership Life Assurance Company Limited (registered in England and Wales No. 05465261), which is authorised and regulated by the Financial Services Authority. Registered office: Sackville House, 143 – 149 Fenchurch Street, London EC3M 6BN.