Is now a good time to buy an annuity?

October 31, 2008 | posted by Pam Atherton in Investments, Pensions | comments (0)

Amid all the doom and gloom surrounding the current economic turmoil, there is at least one piece of good news - annuity rates are at a six year high.

This will be music to the ears for anyone about to retire as high annuity rates may go some way to compensating what you may have lost in the value of your personal pension fund over the last year.

If your  fund has been invested in equities, it may be 40-50 per cent lower than this time last year, in which case you may need to reconsider your retiremement plans altogether. You may decide to work longer and/or defer taking your pension until equity markets have recovered.

If you have been invested in with profits, the fall in the value of your fund may not be quite so severe, but the terms of with profit pension contracts usually require you to take your fund (or transfer it elsewhere) at your ‘normal retirement date.’

Also, with profits funds are likely to suffer from market value reductions in the coming year because of the collapse in equity markets, so you may as well take your fund now.

If you have been invested in cash over the last year, you will probably be feeling pretty smug that your fund has been protected from the stockmarket collapse, even if it hasn’t actually grown that much.

So anyone who needs a pension income now and who is satisfied with the current value of their fund, may be well advised to convert to an annuity now.

Annuity rates are at their highest since 2002, despite the increase in longevity (particularly for men) and the great take-up of impaired life and lifestyle annuities, which previously created an unfair cross subsidy in favour of healthy annuitants.

Stuart Bayliss of Annuity Direct says: “With falling interest rates and the expectation of reduced inflation, the pressure on annuity rates to fall is inevitable. The only factor likely to push them up  is higher gilt rates as a result of the government’s need to borrow significantly more money.”

According to the Defaqto annuity calculator, the best annuity for a male age 60 with a £100,000 pension fund, paying a level income with a five year guarantee is currently £7,052 pa (Canada Life), compared to £6,850 pa in August 2002 (source: Annuity Direct).

But annuity purchase is a complex business due to the fact that there are now so many different types of annuity to choose from. It is also possible to mix and match your annuities so that you hedge your bets against changing personal circumstances and financial conditions.

For instance, you could buy a mix of  investment linked annuities (with profits or unit linked), money back annuities, limited period annuities (for 5 years only) and higher paying ‘enhanced’ annuities (only for those who are in poor health, smoke or are obese).

You also need to decide whether you want to buy a pension for your spouse, an increasing income or inflation linking. Above all, it is essential that you exercise your right to shop around. An annuity specialist can help you do this:

Contact:
www.williamburrows.com
www.annuitydirect.co.uk
http://www.annuity-bureau.co.uk/

Try out the Defaqto annuity calculator:
http://www.defaqto.com/consumer/pensions.aspx

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Adviser news round up - August 2008

September 2, 2008 | posted by Pam Atherton in Insurance, Mortgages, Pensions, Savings | comments (0)

Adviser news round up

Personal accounts dominated the news in August as the Government announced that its research into the effect of means testing on personal accounts showed that individuals with less than 20 years until retirement in 2012 and earning up to £25,000, will see hardly any benefit from personal accounts.

Individuals in these circumstances would see returns of between only 1-3 per cent greater than if they did not save in the scheme. Someone on £10,000 a year, after 20 years of auto-enrolment in a personal account, paying 4 per cent of earnings each month, would be only £2 better off a week, according to the DWP figures.

Industry experts seized on the figures as proof that low earners in this position would be better off saving in an ISA, savings gateway or simply paying off debt rather than being automatically opted into Government’s new flagship scheme which is due to start in 2012.

Scottish Life, head of pensions, Steve Bee said that improving the basic state pension would be a far more cost efficient way of achieving a decent replacement rate of 84 per cent, than personal accounts which might provide a replacement rate of 92 per cent, but at a cost of savings over 40 years.

Standard Life’s John Lawson attacked the DWP for abandoning its discussions with pension providers about an acceptable quality test for existing pension schemes in 2012, but a spokesperson for Aegon insisted that the talks were ongoing.

The solution put forward by a number of trade bodies, including the Association of British Insurers, would have allowed employers to certify that the majority of their employees would be as well, or better off, under their existing pension arrangements than they would be in personal accounts.

Such a test would allow schemes to continue using their existing definitions of pensionable earnings and would only require companies to review their pension arrangements against personal accounts every three years.

Failure to agree would mean that employers would have to measure contributions to their existing schemes against what would be required under personal accounts, and in the event of a shortfall, reconcile any differences through top-up payments.

There was also concern over the future of Qrops in the wake of HMRC striking off three Singaporean Qrops from its permitted list and some expatriate advisers warned of a potential mis-selling scandal.

Elsewhere, the FSA is to delay publication of its feedback report on the RDR discussion paper until November 2008 (previously due in October) to allow its recently appointed MD of retail markets, Jon Pain, to settle into his new role.

Following the upsurge in cases of mortgage fraud, the FSA said it is considering regulating every individual mortgage broker and making all IFAs giving mortgage advice subject a separate approved person status for mortgages.

The extra cost of bank regulation in the wake of the Northern Rock debacle means that the FSA might exceed its budget this year and the industry could face fee rises in 2009 and 2010.

The ‘treating customers fairly’ regime came under attack from Nick Prettejohn, chairman of the Financial Services Practitioner Panel, who said it was taking up too much of the FSA’s resources.

Elsewhere, a Standard Life survey showed that nearly 70 per cent of advisers believe they can achieve a diploma standard qualification within three years and 83 per cent within five years.

In a sign that investors are diversifying their investments, the IMA said nearly half of total net return fund sales in Q2 2008 were attributable to fund of funds, while tracker funds saw a net outflow of £700,000.

Norwich Union said it is looking to enter the variable annuity market, following similar announcements from AXA and Standard Life.

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Adviser news round up

August 11, 2008 | posted by Pam Atherton in Investments, Pensions | comments (0)

 The debate over the Retail Distribution Review continued apace with Whitechurch chief executive, Kean Seager, predicting it could kill off up to 20 per cent of the intermediary market.
 
Skandia supported a split between advice and sales but that is should be applied across the whole of the financial services market.  Sesame called for advisers planning to retire in the next 10 years to be relieved of the requirement to achieve diploma equivalent qualifications.
 
Aegon chief executive, Otto Thoresen, branded the RDR as too complex and that the industry was trying to deal with too many things at once.
 
But change could be in the offing as new FSA chairman, Adair Turner, described the RDR as ‘ongoing,’ and that he would also scrutinise the TCF requirements when he takes up his new post in September.
 
Amanda Bowe is to step down from her role as FSA head of RDR after the feedback statement is published in October.
 
Elsewhere, HBOS claimed the FSA did not know what form ‘management information’ should take by the March deadline for firms to have Treating Customer Fairly procedures in place and AIFA said the FSA would have difficulty in proving the cost/benefit of the TCF initiative.
 
Meanwhile, the Government said the Personal Accounts Delivery Authority (PADA) would be given significant state funding, with only a long term objective to become self funding.  It said this was justifiable on the grounds that the scheme would have to accept workers whom commercial pension providers would find unviable.
 
But in a backdown on its original proposals, PADA said employers will be able to use their existing methods of calculating pay when working out whether they will be exempt from placing employees into personal accounts from 2012.
 
The row over delays by insurers in making annuity payments rumbled on, with some firms calling for the worst offenders to be named and shamed.
 
Living Time marketing director, Dave Harris, called for the open market option (OMO) to be the default option for people buying annuities nd urged IFAs to spurn annuity commission when clients purchased one from their existing provider without advice.
 
Retirement Partnership managing director, Steve Lewis, suggested that insurers should inform pension investors of the OMO facility five years before retirement. Meanwhile the ABI is considering cigarette packet style warnings on pension marketing material as a way to encourage greater uptake of the facility to shop around.
 
Elsewhere, AIFA said it believed the FSA was considering bringing in a 15-year long stop for customer complaints, despite the RDR interim report erring against it.
 
There was much excitement about the business opportunities presented by the easing of the protected rights self investment rules from 1 October, with industry experts predicting a boom in Sipp business.  There’s  an estimated £100bn sitting in personal pension protected rights and a further £250bn in contracted-out final salary schemes.
 
But the new rules will only apply to Sipps and not SSASs and Scottish Widows expressed concern that those in low cost pensions might be mis-advised to transfer into Sipps.
 
Elsewhere, Fitch Ratings predicted that early entrants to the variable annuity market could be the big winners as this new form of annuity could become a quasi-replacement for with profits.
 
The trade press unearthed past legal skirmishes that Dolly and Brian Pickering of IFA firm, Heather Moor & Edgecomb, have had with the FSA and the Appeal Court.  Only weeks ago, the couple were hailed as IFA champions for refusing to pay FOS fees for four customer complaints which were not upheld by the Ombudsman.
 
Meanwhile, Clerical Medical did a swift U-turn on its cancellation of trail commission where advisers were not offering ongoing service. Elsewhere, industry experts predicted a fall-off in mortgage procuration fees.
 
A survey by MetLife showed that two thirds of IFAs’ clients were seeking different ways of planning for retirement as a result of stock market volatility.
 
The Parliamentary Ombudsman at long last recommended that Equitable Life policyholders should receive compensation for losses, with late joiners expected to be the most likely to benefit from any lifeboat fund.
 
 

 

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Drawdown investors consider annuitisation as income falls

August 5, 2008 | posted by Pam Atherton in Pensions | comments (0)

Pensioners who opted to take income drawdown at retirement, rather than purchasing an annuity, could face a sharp drop in their monthly income as a result of recent stockmarket falls.

Income drawdown is the facility to draw a monthly income from your pension fund while it remains invested in the stockmarket and has been favoured by those with large pension funds wishing to retain control over them while in retirement.

But it is a risky strategy and only recommended for those who have assets, other than their pension, to live off.

This is because the income you can take each year under an income drawdown plan is limited by the taxman to between zero and 120 per cent of what a standard annuity would pay you for your age until age 75. 

The amount is re-set every five years when your plan must be reviewed by a specially qualified financial adviser.

Recent stockmarket falls are  prompting many drawdown investors to switch from drawdown to annuities because they have seen the reduced level of income they would be locked into for the next five years following a five yearly review.

Those who are worst hit are those who have been taking the maximum permitted income. For example, if the annuity rate for a 65 year old man is 7.5 per cent, you could take a maximum of 120 per cent of this, or 9 per cent.

Assuming a £100,000 fund, that would give you an annual income of £9,000, but if the fund dropped 20 per cent to £80,000,  your annual income would fall to £7,800 (9 per cent of £80,000).

In addition, if you continued taking the maximum allowed, your fund could become depleted, particularly if the underlying investments continued to perform poorly.

This is why advisers recommend that pensioners don’t take the maximum income allowed, so that they have some leeway in the event of equities falling in value.

 If stockmarkets improve over the next year, you can always ask for a review before your next five yearly one, although your adviser will charge an extra fee for this.

If you can’t stomach further stockmarket volatility or you are approaching age 75 (when income drawdown can’t be taken any more and you have to switch to an Alternatively Secured Pension or buy an annuity), now may be the time to annuitise.

Billy Burrows of The Retirement Partnership says: “The current market conditions show just how risky drawdown can be, particularly for those taking maximum income.  But the good news is that  annuity rates have been increasing since the beginning of this year as a result of rising bond yields.”

Defaqto pensions principal, Matt Ward, says: “Given the well publicised fact that people are living longer, allied to the current volatility of the investment markets, there is a potential danger that the income drawdown pot will not be able to sustain the client’s retirement needs. If the client is not comfortable with the risks involved, their financial adviser may need to consider sacrificing the flexibility of income drawdown with the stability of an annuity, or appraise the suitability of the new breed of unit-linked guaranteed facilities.”

To see how much your pension fund would buy you, visit our Annuity Calculator:

http://www.defaqto.com/consumer/pensions.aspx

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Tax refund change set to hit pensioners and higher rate taxpayers

July 28, 2008 | posted by Pam Atherton in Banking, Pensions, Savings, Taxation | comments (0)

Pensioners, non working spouses and higher rate taxpayers are all likely to be among the individuals to be hit by the Revenue’s move to shorten the time limit for tax refunds from six years to four.

Many elderly people could be left unable to reclaim hundreds of pounds of tax deducted at source from savings income and annuities, while higher rate taxpayers who are members of  company pension schemes, may be unable to claim the extra 20 per cent tax relief due on their pension contributions.

Cuurrently individuals can reclaim overpaid tax going back six years to the 2002-03 tax year. But as part of the Finance Bill currently going through Parliament, this time limit will be reduced to four years from 2010.

Many older people and those on PAYE often have their tax affairs reviewed only every few years and therefore may discover too late that they are eligible to  make a reclaim for overpaid tax or claim a tax relief. 

Retired and non-working spouses often find they have paid too much tax because of the banks’  requirement to deduct 20 per cent income tax at source on  savings interest. If your total annual income is less than your tax free personal allowance, you can register to receive interest gross by completing form R85.

But this isn’t possible if your income exceeds your personal allowance, in which case the bank or building society will deduct 20 per cent income tax automatically on all your savings interest, even if your circumstances change during the tax year.

This means that savers entitled to the 10 per cent tax band, which has been retained for certain low income groups, will have to make a reclaim for overpaid tax at a later date.

Higher rate taxpayers contributing to company pensions often assume that the higher rate tax relief which is payable on pension contributions is recouped by their pension scheme and added to their pension fund automatically. But this isn’t the case.

All pension contributions (whether to a company scheme or to any form of personal pension) are paid net of 20 per cent income tax.   Higher rate taxpayers need to reclaim the remaining 20 per cent tax relief they are entitled to via their self assessment tax returns.

Any overpaid tax will then be refunded, either by raising their tax- free allowance through PAYE (if employed), or used to reduce your tax bill, if you are self employed.

Employees who are higher rate taxpayers and who opt to pay their company pension contributions via salary sacrfice, don’t have to worry about this. Their contributions are paid gross, directly from their employer to the pension provider, so their pension funds benefit from higher rate tax relief automatically.

STOP PRESS: Self employed individuals who owe tax need to get their tax bills paid today if they want to avoid swingeing penalties and fines. The deadline foor second payments on account for the  2007-08 tax year is midnight on Thursday 31 July.

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Postcode annuities may penalise healthy pensioners

July 24, 2008 | posted by Pam Atherton in Pensions | comments (0)

It’s all change in the once sleepy world of annuities. And before you yawn with boredom, be aware that you may well have to buy one yourself, whether you like it or not.

This is because three quarters of final salary (defined benefit) schemes are now shut to new employees and more workers belong to group personal pensions or have some form of individual personal pension arrangement, such as a stakeholder or Sipp.

All these types of personal  pension require you to buy an annuity with your pension fund when you come to retire (unless you decide to do income drawdown instead, but that’s another story).

The cost of buying an annuity has soared over the last 15 years, as bond yields have fallen and longevity has increased.

In addition, whereas most insurers used to assess annuitants’ likely life expectancy based on gender, age and marital status, the business of rating how long someone is going to live is now a much more sophisticated.

This is because the difference in lifespans in different parts of the UK is quite stark. People living in Glasgow, for instance, have the shortest likely lifespans for anywhere in the UK, whereas men living in West Dorset have the longest.

Hence, the shift to what is known as ‘postcode annuities’ whereby insurers look at geographical, as well as health and socio-economic, factors when estimating life expectancy.

The idea is that if you live in an area with a history of people dying early, the insurer will pay you a higher annuity income because you are likely to die much sooner than someone living in a ‘long life’ hotspot,  such as Bridport in Dorset.

There are also strong correlations between blue collar workers living in the north of the UK and shorter life expectancy, and wealthy white collar employees in the south and longer life expectancy.

Norwich Union is to follow Legal & General and to start using postcode annuities from September this year. Annuitants will be divided into nine groups based on geographical life expectancy, with those with the shortest life expectancy receiving up to 2 per cent more than those with the longest expected lifespans.

NU admits that this will mean that around 30 per cent of ‘healthy annuitants’ will be worse off.

Defaqto pensions principal Matt Ward says: “This development is yet another sign that annuity rates are moving towards an individual pricing basis. The onus for consumers who view annuities as their preferred method for translating retirement savings into retirement income is to shop around to find the best annuity rate in the market for their individual circumstances, whether this be through their smoker status, health outlook or postcode.”   

Currently only one in three individuals approaching retirement bothers to seek out the best rate in the annuity market by using what is called “the open market option” - or the right to shop around, to you and me.

By doing so, you could obtain up to 16 per cent more than the standard rate if you are a smoker, and up to 30 per cent more if you have a life threatening illness or medical condition.

It is best to use an Independent Finacial Adviser when looking to purchase an annuity as it is a complex business and once you have bought an annuity you can’t change your mind afterwards. 

It really is a ’once-and-for-all’ decision which will affect your income for the rest of your life.

 You can get an idea of how much your pension fund might buy you  by using the Defaqto Annuity Calculator:http://www.defaqto.com/consumer/pensions.aspx

IFAs specialising in the annuity market include:
http://www.williamburrows.com/
http://www.retirement-partnership.co.uk/
http://www.annuitydirect.co.uk/
http://www.annuity-bureau.co.uk/

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Investors to have more control over their pension funds

June 30, 2008 | posted by Pam Atherton in Insurance, Investments, Pensions | comments (0)

A long waited ask of the pensions industry has finally been granted. The rules governing how ‘protected rights’ can be invested are to be relaxed from October this year.

Protected rights funds accrue if you choose to contract out of the State Second Pension or S2P (formerly known as Serps, the State Earnings Related Pension Scheme).

By contracting out of the S2P,  you are assuming that you can invest the money better yourself in order to create a large pension pot for retirement.

When you opt out, the Government pays a rebate of your national insurance contributions, plus some tax relief into your pension, whether this is a final salary scheme or some form of personal pension, such as a group personal pension, stakeholder or Sipp.

Over many years, this sum can mount up to a five or even six figure sum, but until now, the Government has insisted on strict rules as to how this money can be invested.

This was because the Government believed that money saved to replace state benefits should be ringfenced from too much investment risk, so protected rights could only be invested in cash, gilts or insurance company funds within an ‘appropriate personal pension.’

A few pension providers, namely Scottish Widows, Merchant Investors and Suffolk Life, got round these restrictions by offering an insurance contract to hold protected rights alongside a trust-based Sipp for non-protected rights holdings.

But these offerings are expensive and are not available to most investors. The new rules will represent a major new freedom because all pension holders be able to invest their protected rights more or less as they wish - even in hedge funds and structured products.

IFA firm Hargreaves Lansdown estimates that the average value of protected rights is £16,500, but Suffolk Life, an upmarket Sipp provider, says that 40 per cent of its new Sipps come with an average protected rights pot of £50,000.

Defaqto pensions principal, Matt Ward, says: “Allowing Sipps to hold protected rights money from October 2008 is positive news for those clients seeking investment flexibility for these assets over and above the traditional route of insurance company funds.

“Many clients will now be able to fully consolidate their pension arrangements under one roof which should make the ongoing task of monitoring their retirement saving status more straightforward. Clients should, however, seek advice from an IFA on what action to take with their protected rights fund.”

Until 2012, protected rights funds must be used to buy an  annuity incorporating a 50 per cent spouse’s pension, but after 2012 there will be no restriction on the annuity purchased.  

For the latest annuity rates, visit the Defaqto annuity calculator to see how much income your fund will buy you:
http://www.defaqto.com/consumer/pensions.aspx

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Retirees still failing to shop around

June 24, 2008 | posted by Pam Atherton in Pensions | comments (0)

Two in three retirees are failing to shop  around for the best annuity rates when they come to retire and thereby depriving themselves of much needed extra income.

Despite the fact that insurers are required to alert people approaching retirement of their right to shop around for an annuity, two thirds fail to do so, either out of ignorance or inertia.

The Financial Services Authority recently castigated insurers for failing to write to their pension  customers approaching retirement in a user friendly way. Of 55 insurers’ letters they studied, 40 per  cent were found wanting because they were full of jargon and failed to spell out the benefits of shopping  around. 

Information about the right to shop around across all the insurance companies  selling annuities by using the so-called ‘open market  option’  is often poorly explained so that retirees fail to cotton on to its availability or how to go about it.

This means that people could be missing out on extra income of up to 10 per cent if they are in good health,  15 per cent if they are smokers or obese  and up to 30p per cent if they have a medical condition which is likely to reduce their life expectancy.

What’s more, once you have bought an annuity, you can’t change your mind afterwards and switch to another insurer offering a better deal. Annuity purchase really is a ‘once- and-for-all’ decision.

Even if you have a company pension scheme, sometimes the scheme trustees will ask a firm of financial advisers to buy annuities for members who are about to retire. But unless you alert the trustees to the fact that you are a smoker, obese, or have a life reducing medical condition, they won’t be able to obtain the best rate for you.

Some trustees only pass on basic information about their members such as age, gender and marital status to the financial advisers, so the onus is on you to make them aware of any health or lifestyle issues which could improve the income you receive.

If you have any form of personal pension, such as a stakeholder, group personal pension or a Sipp, you will have to arrange annuity purchase yourself or with the help of an independent financial adviser specialising in  annuities and retirement planning.

Independent Financial Adviser Promotion (IFAP) can put you in touch with an IFA (www.unbiased.co.uk) or you can do the legwork yourself by comparing rates using the Defaqto annuity comparison tool
http://www.defaqto.com/consumer/pensions.aspx

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

Why now may be a good time to buy an annuity

June 19, 2008 | posted by Pam Atherton in Insurance, Pensions, UK economy | comments (0)

What with falling house prices, soaring energy and food costs and rapidy rising inflation, it seems as though the financial news is unremittingly gloomy.

But one piece of good news  is that annutiy rates are rising and now could be a good time to buy one, particularly if you have been deferring purchase in the hope that rates would rise.

Despite stockmarket set backs at the beginning of 2008,  pension funds have recovered around two thirds of the losses they sustained during the 2000-03 bear market.

For anyone considering buying an annuity, we are now seeing a conjunction of relatively high fund values and annuity rates.

Billy Burrows of William Burrows Annuities explains: “In February 2008, pension funds  invested in equities had fallen by about 6 per cent since August 2007 and annuity rates were down by about 1 per cent.

“However, now the stock market is only 3 per cent down compared with August 2007 and annuity rates have risen by more than 5 per cent since last August.

“This means that somebody retiring today would get nearly 9 per cent more pension compared with someone retiring in February 2008, providing they have remained invested in equities throughout the period.

“As both annuities and the stock market are going up, it might make sense for investors to lock into these gains and secure their incomes by purchasing annuities.”

The reason for rising annuity rates is that they are dictated by the yield on long-dated gilts, corporate bonds and longevity trends.

Until recently, yields had been falling, largely due to a lack of supply of long-dated gilts (which insurers have to buy to back annuities), longer life expectancy and low inflation.

Now, with growing inflation and the prospect of higher interest rates, annuity rates are rising.

But what you gain with one hand, you lose with the other. While higher inflation has the beneficial effect of  pushing up annuity rates, living on a fixed income with high inflation is no joke.

Inflation at just 2 per cent will reduce your spending power by 40 per cent over 25 years. If inflation were to hit 5 per cent, your spending power would be cut by 70 per cent over the same period, according to Met Life.

In practice, few pensioners buy inflation-linked annuities because the starting income is roughly a third less than what a level annuity pays.

To complicate matters, if you defer buying an annuity, there is an opportunity cost in that the income you forgo in the deferral period is rarely recouped through higher payments in the future.

So as with all things pensions, nothing is straightforward, but you can check out the top paying annuity providers at any time by using the Defaqto annuity calculator http://www.defaqto.com/consumer/pensions.aspx

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit

FSA to intervene on comparison websites

May 9, 2008 | posted by Pam Atherton in Insurance, Investments, Mortgages, Pensions, Savings | comments (0)

It is good to hear that the FSA intends to review the price comparison website market, after years of complaints about the lack of  independence and accuracy of information provided by certain websites.

The price comparison market has grown exponentially over the last few years, with two thirds of people using a comparison site before buying home or motor insurance.

Having studied 17 insurance comparison sites, comprising 95 per cent of the market, the FSA said results were mixed and that it had found evidence of sites failing to make details of insurance deals clear, and  providing quotes which were no longer available.

The review was triggered by research by the British Insurance Brokers’ Association, whose members have encountered increased competition from comparison sites.

The FSA’s research found that consumers often had difficulty accessing and understanding the small print of policies offered online and that headline grabbing quotes often applied to only a very small group of consumers.

There is also the issue of whether such sites are ‘treating customers fairly’ which the FSA is now monitoring more closely. There was also found to be a lack of transparency as to what extent the sites were truly ‘whole of market.’ 

Some sites require insurers to pay a fee to have their quotations featured, leading to some insurers, such as Direct Line being excluded. Defaqto, which is entirely independent and whole of market and supplies the FSA with comparison data for mortgages, savings, annuities and some investment products, has queried the independence of certain comparison sites and wholeheartedly welcomes the FSA’s long overdue review.

Many of the FSA’s comments  reflect  the findings of Defaqto’s own studies into this area, both in October 2007 and in its latest Insight Report ‘UK Motor Aggregators 2008 - Still much to do.’ which is due to be published next week.

The forthcoming report from Defaqto studies the workings of 41 separate motor insurance aggregator websites, and looks in detail at how they perform over 35 separate criteria. “In October 2007 we discovered a number of serious issues with the way some aggregator websites worked.

The findings in our latest report show that many of these issues are still with us,” says report author Mike Powell,  principal consultant at Defaqto.  www.defaqto.com  allows customers to check some of the most important elements of cover for all comprehensive motor insurance policies held on its Aequos Database, as well as many other financial products.    

Bookmark this article: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • blogmarks
  • BlogMemes
  • Reddit
Next Page »