1st March 2018 sees the introduction of the Financial Conduct Authority’s annuity comparator requirements. The objective of this is to assist and encourage pension holders to shop around to obtain the best possible terms for an annuity.
With a client’s prior permission, and provision of personal data, pension illustrations will show the annuity income quoted is the best in the market or indicate that the client could get a higher annual income elsewhere. Of course, in the absence of any prior consent or data provided, no such comparisons can be illustrated.
The aim of these changes is to provide clients with the best possible ‘outcome’, i.e. to benefit from the best annuity rate in the market.
Whilst this is to be commended, there are a number of issues of which to be aware. One is that not all quotes will be provided on a like-for-like basis, leading to possible confusion. Furthermore, such figures may not take into consideration health or lifestyle conditions. Another potential issue is that the annuity market is fluid, so final illustrations may show income rates from providers that are no longer available and no longer the most competitive.
To be clear, an independent and up to date appraisal of annuities is something we as advisers already get involved in on a regular basis. Furthermore, this is bespoke, as we do take into account personal circumstances that may influence the terms which a client can personally secure. Our discussions with clients regarding retirement income planning also includes options other than annuities, such as Flexi-Access Drawdown (FAD) for example, and how these may fit into one’s overall financial planning.
Feel free to call us to see how we can help you make the right decision.