“Reviewable v lifetime lock-in” annuities
02/02/2013 | Download PDF
Adam Wrench, Head of Product and Business Development, When using the OMO to shop around to secure the best deal for clients consideration should be given to “reviewable v lifetime lock-in” annuities.
“We applaud the FSA’s recent decision to address the apparent lack of appreciation, when it comes to the Open Market Option (OMO) and a retiree’s rights; as it is high time there was a far greater awareness of the need to shop around when it comes to choosing an annuity.
The Association of British Insurers (ABI) Code of Conduct, to be introduced in March, will require insurers to disclose the OMO to their customers which is a step in the right direction. Choosing an annuity is not a decision that should be taken lightly, and the adviser community has a moral duty to ensure that an annuitant’s choice has been carefully considered and that they have been made fully aware of the best rates available to them.”
Adam’s comments came in response to the FSA’s thematic review on annuities which found that consumers may be disadvantaged as a result of not shopping around when purchasing an annuity.
“We would urge people to avoid any deals which lock them into a fixed rate, as while these might very well offer them the best rate available according to their circumstances today, they will fail to take into account any future changes further down the line. People who lock into a conventional annuity at 65 will be unable to benefit from any increases in the annuity rates, which are currently at a historic all time low, nor benefit from an enhanced rate in their later years should their health deteriorate over time.
We would recommend that in addition to the OMO, advisers seriously consider the use of reviewable annuities, which can be reassessed on a regular basis to enable the annuitant to benefit from any age-related rate increases, or future health issues.”
Notes to Editors:
About London & Colonial
London & Colonial specialises in self-invested products for both UK residents and persons resident overseas.
The London & Colonial Group includes
(1) London & Colonial Holdings Limited – UK parent company
(2) London & Colonial Services Limited which is regulated by the UK Financial Services Authority and operates SIPPs and SSASs
(3) London & Colonial Assurance PLC which is regulated by the Gibraltar Financial Services Commission (matching UK standards) and which offers Open Annuities, QROP Annuities and Open Offshore Bonds
(4) L&C (Administration Services 2) Limited and London & Colonial (Trustee Services) Limited which are both based in Gibraltar and offer the EU SIPP.