Following the publication of the latest annuity market data by the ABI last week, Hargreaves Lansdown has once again conducted a thorough analysis of the rates quoted. This has shown that the gap between the best and worst rates has widened, from 31.3 percent in December 2013 up to 34.93 percent in July. 

On a typical annuity purchase value of £21,000, over a 20 year retirement this equates to £7,162 of lost income. We also looked at the distribution of the rates, to see how many companies are offering terms which are, if not the best, at least somewhere close to the best rates of the market. This is a good indication of how competitive the market is. Taking a cut-off point of 10 percent below the best rates on the market, it turns out that on average more than half of companies are offering rates below this ‘good value’ threshold, whilst on average only around one third are bothering to offer their customers something vaguely close to competitive terms.

Some companies are failing to supply data to the ABI Window at all: Fidelity, NFU Mutual and Wesleyan simply claim to offer a panel, without disclosing how competitive their panel terms are. Others state that they are passing their customers to another insurance company; again they don’t reveal what terms those customers actually receive. Tom McPhail, Head of Pensions Research, Hargreaves Lansdown: “It is painfully obvious that some companies are making no effort to offer their customers decent value. For investors who do shop around, competitive rates are available; unfortunately we also know that in spite of the recent budget reforms, investors are still being rolled over into their existing provider’s annuity. What’s more many pension providers are failing to offer investors a low cost alternative to annuities, such as a drawdown plan.”