we explore the pitfalls and possibilities
Why Should the Annuity Buyer Beware?
THE ARGUMENT AGAINST PENSION ANNUITY RATE TABLES AND RATES CALCULATORS
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You may already have visited other annuity sites and used a rates calculator or consulted a rate table. 7 questions you need to ask...
Were you sure that the information was in date?
Was it an illustration rather than an individual quote?
Did you know that independent annuity brokers may have access to a wider range of retirement annuity possibilities?
Did the table or calculator take into account all products on the market or just a selection?
Did the site promote particular providers over others as they are paid higher commissions by some?
Are the providers able to pay to list their annuity products higher up the tables, or to have their products shown in a different way?
Did you know that the annuity rates may change before your application goes through? If you received a quote, was it guaranteed by the site?
PLUS, WERE THE TABLES UPDATED BY MACHINES OR HUMANS?
Did those sites use 'screen-scraping' technology that retrieves and transfers information from other programmes?According to Wikipedia, "Screen scraping is generally considered an ad-hoc, inelegant technique, often used only as a "last resort" when no other mechanism is available. Aside from the higher programming and processing overhead, output displays intended for human consumption often change structure frequently. Humans can cope with this easily, but computer programs will often crash or produce incorrect results."
BUT THE SITE STATED IT HAD BEEN RECENTLY UPDATED
Even if the table or calculator was 100% up to date and correct, were you aware that the stated annuity rates may have no resemblance whatsoever to the income that you will actually achieve? This is because your annuity may increase due to your circumstances, i.e. your state of health, medication that you may be taking and whether you're a smoker or not. Some providers even base your future income on your previous occupation or postcode.Again, let's say you do find a site where everything is up to date and works correctly; do you know at this stage whether you want a level, a fixed-rate escalating or an rpi-linked escalating annuity? Additionally, have you considered your partner's or dependent's percentage on your death? Have you considered an unsecured pension? The choices are often bewildering.
WHAT DOES THE FSA SAY ABOUT COMPARISON TABLE SITES?
Comparison table sites have been heavily criticised in the media and by the FSA, the UK financial regulator, for their lack of independence and incomplete information. Consumers often don't realise that they're not getting the complete picture.The FSA (Money Made Clear) say "Some may only include products that the website can make money from in some way, for example if you click through to the provider." They also state that you should never buy a product just on the basis of what you see on their own tables. They recommend getting advice before using their tables.
(Please note that the information on this page does not represent financial advice. You must consult a broker for complete information. "The argument against annuity rate tables and calculators" is an opinion only and you should not rely on this information to make (or refrain from making) any decisions.)
Tags: Comparison Sites, Money Made Clear, FSA Gov Tables
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