- Estimate 70 per cent of those with pension funds of £40 k or under ignore open market option
- Barriers to writing small pension fund business removed with online solution
- Costs for typical funds under £30k slashed
- Inertia costing £450 m collectively for the rest of their lives
- Typical OMO rates would increase income by 12 percent
- However people with health conditions would gain even more – missing out on 19 per cent income for life, equivalent to £311 million for the rest of their lives or 69% of the total pension income missed by people with funds under £40 k.
INDEPENDENT financial advisers have an extensive, ready made market advising the tens of thousands of people who retire each year but fail to shop around for the best annuity options on the market, says Partnership.
The retirement specialist’s analysis of the market leads it to believe that out of the 270,000 people who purchased annuities last year (2009) with funds under £40k, just 80,000 shopped around to find the best annuity rates.*
Casting the net wider for improved annuity rates would typically increase their income by 12 per cent for the rest of their lives, estimates Partnership and financial advisers can now get a bigger slice of the market via the specialist’s dedicated online annuity solution tool.
Although the business is there for the taking, advisers have generally shied away from this segment of the market because of the high levels of cost involved in typical £30,000 pension funds.
“For a typical adviser the true cost of advising on a £30,000 fund is estimated at £750. Given typical commission rates of 1.5%, this would result in a loss of £300,” said Andrew Megson, Managing Director of Retirement.
“It is clear that customers and advisers would benefit significantly from a simpler more efficient process, which is one of the key reasons we have created a solution to enable advisers to provide better value for the 80% of people retiring with funds below £30k,” he said.
“Our new online enhanced annuity solution will ensure profitability for advisers writing annuity business. This solution is being made available through the New World Distribution Services platform, designed by 1st-The Exchange,” he added.
Partnership’s latest market analysis leads it to believe that the vast majority of people at retirement age – 70 per cent – with typical pension funds of under £40,000, do not attempt to increase their retirement income by taking advantage of the open market option (the right to shop around for the best annuity rate at retirement).
According to the Association of British Insurers (ABI, 3rd Quarter 2009) over 80% of annuities were bought with funds of less than £30,000. This trend is predicted to continue.
There is also a huge – and constantly growing - market for those with ‘impaired’ conditions which qualify them for higher annuity rates due to underwriters’ assessments of shorter life spans for people with a range of qualifying conditions.
“This is far more significant for the 40% of people with impairments or health conditions who are eligible for so-called ‘impaired’ annuities – typically smokers and those who suffer from a range of medical conditions – not shopping around for the best rates is costing around 19 per cent a year in lost income for the remainder of their lives,” explained Megson.
Partnership’s solution enables advisers to transact an enhanced annuity online using 10-12 simplified yes/no medical questions.
These are designed to reflect the needs of the majority of smaller enhanced annuity cases and will enable the adviser to process this business quickly and profitably while still delivering an enhanced rate to their customers.
Crucially, the speed and ease of this process is enabled by Partnership’s expertise in medical underwriting.
"Partnership has developed a solution to this problem that rests at the heart of Treating Customers Fairly,” said Megson.
“By providing answers to a short series of basic health and lifestyle questions, using a platform designed for speed and intuitive use, clients stand to benefit from the increased income of an enhanced annuity.
“This makes it far easier for advisers to grow their business exponentially in this important and neglected area of the market." *
Analysis based on ABI Providers’ returns, 2009 re 450,000 lives in September 2010
– Ends –
Media Enquiries:
Jim Boyd
Director of Corporate Affairs
07973 458675
Partnership
jim.boyd@partnership.co.uk
Rebecca Dwyer
Consultant
0774 757 8617 / 01273 777144
David Andrews Media Ltd
rebecca@davidandrewsmedia.co.uk
David Andrews
Senior Consultant – Director
07941 255855 / 01273 777144
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 the most 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 winner of the 'Long-term Care Provider' award at Health Insurance Awards 2009 and this year’s Simply Biz ‘Annuity Provider of the Year’ award.” 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.