Most people stuck in level annuity groove, NU finds

Submission to City Wire following article in new Model Adviser newspaper.

 

This piece is of no surprise to me, not because of any perceived failings in the advice given to annuitants that ignores future rises in living costs, but because any comparison of the total cumulative annuity payments receivable from a level pension versus an escalating pension shows the crossover point at which the escalating pension becomes better value is well into a person's 80's or sometimes their early 90's.

 

The cynic in me makes me think annuity providers view business in escalating annuities as nicely profitable.

 

What is more, I find it hard to shake that view when I see the rate of conversion of cash into escalating pension for the Universities Superannuation Scheme (USS).

 

Admittedly the USS does not have additional costs to meet like providing a return to shareholders, or paying commissions and other costs to support a distribution route through intermediaries.

 

However the last time I advised a client regarding the USS, open market annuity rates on a like-for-like basis were some 25% worse. 

 

So, a plea to providers of escalating annuities, give our clients a better deal.  

 

Robin Keyte

 

 

Dr R W Keyte  -  Director, Chartered Financial Planner & CERTIFIED FINANCIAL PLANNER CM      
Towers of Taunton (Financial Services) Ltd