Insurers short-changing older customers

Older people in the UK are potentially missing out on millions of pounds in their retirement, it has been revealed.

Official data released by the Association of British Insurers (ABI) shows for the first time how some of the nation's biggest insurers are short-changing customers.

With a number of them offering annuity rates up to 30% below the best deals on the market, it means older people are losing out on bumper pay days in their later years.

Scale of disparity revealed 

The decision by the ABI to publish the rates offered by all of its members to pensioners looking to convert their savings into an annuity follows heavy criticism at the lack of transparency in the annuity market.

The ABI's comparison table of rates offered by its members to customers exposes the scale of disparity between providers.

For instance, a 65-year-old with average pension savings of £24,000, and in good health, can get £1,099 a year from Reliance Mutual but just £839 with taxpayer-backed Scottish Widows.

An individual who has smoked for more than a decade, meanwhile, could receive £1,700 a year from Reliance because their life expectancy is likely to be shorter.

The figures assume that a 25% tax-free lump sum is taken by the ­customer, leaving a balance of £18,000 to buy the annuity.

Pensioners advised to shop around

'Annuities are expensive and they're not for everyone,' said Pensions expert Yvonne Goodwin, speaking to the Daily Express. 'The majority who buy annuities do so from their existing pension provider without looking around for the best deal, but they could be losing out.

'Every penny counts in retirement which is why people need to shop around because once you have bought an annuity, that's it for the rest of your life.'

Age UK hopes this new data will encourage more people to shop around and get the most out of their retirement income.

Copyright Press Association 2013