Annuity quotes rise as men rush to beat G-Day changes

Despite annuity rates standing at an all time low, the number of consumers requesting quotations - and by inference purchasing a regular retirement income - has risen steadily since August 2012 according to Avelo.

Related topics:  Retirement
Amy Loddington
20th December 2012
Retirement
With over two thousand additional quotes registered in the last week in October compared with the last week in July 2012.

While it’s easy to dismiss this as a blip, further in depth analysis of data from Avelo Exchange, which processes 50% of all annuity quote requests from UK advisers, suggests there’s a distinct rationale behind the rise.  The figures show that it’s overwhelmingly men who are behind this leap in quote volumes while quotes from women, in contrast, remain static.  As it’s men who stand to lose out when the EU Gender Directive comes into force on December 21st, there’s a strong suggestion that those “at retirement” are being swayed to take out an annuity now rather than risk waiting to see how the rate changes will affect them.
.
Further examination of the data reveals that G-day could also be affecting when those at retirement look to take an annuity.  For some time most people looking for quotes on a retirement income stated a wish to annuitise between 62 and 63 years.  However, this has changed dramatically from July onwards, where proposed retirement dates have fluctuated violently.  The age men look to annuitise has spiked from 63 – 65 since July and this is potentially because older men are moving to take a regular income now to take advantage of pre G-day prices.  The age of women and those seeking joint annuities, by contrast has varied enormously both reducing to atypically low rates and, in the case of joint purchase, reaching a high of 65.  All of which underlines how much confusion exists among consumers about when is the right time to take out an annuity.  This fact is backed up by recent consumer research undertaken by Avelo where 44% said they didn’t feel they had sufficient information to make the right decision on planning for their retirement.

Until recently, consumers appeared to have very little appreciation of G-day or its potential impact on their retirement income.  Our research found that 37% had not heard about G-day.  However, when prompted, 19% said they thought the changes were unfair and 25% said they would be more inclined to move quickly to avoid any potential changes which would likely follow.
 
Dave Miller, Head of Provider Relationships, Avelo commented:

“The significant changes to annuity rates and insurance which Europe is imposing on us at G Day have failed to register with most consumers until now.  But judging from the late surge in enquiries we are receiving on Avelo Exchange the message has been getting through as we move rapidly nearer to the now imminent deadline.  While clearly awareness – albeit at the eleventh hour – is better than none at all, it’s potentially risky for those at retirement to make a kneejerk reaction which will impact their financial position for years to come so they should seek financial advice before making a move.”

Encouragingly, however, there’s already some evidence that consumers are actually taking a more considered approach with 15% saying the G-day changes would be more likely to make them shop around for the best deal rather than sticking with their provider by default.  In due course, we’d also expect to see an increase in sales of both joint and short term annuities as consumers look for ways to mitigate the prices rise.  On this score, data from Avelo Exchange only shows a small rise in sales of joint annuities since August 2012.  But with prices static at the moment, we’d expect interest in joint annuities to increase further after providers start to price in G-day changes. 

Dave Miller, Head of Provider Relationships, Avelo concluded:

“There is no doubt that G-day changes are going to impact the income men can expect to receive in their annuity and over the years this will mount up.  But, with the current uncertainty regarding the precise effects of this change; rushing to take advantage of pre-G-day rates may well prove to be a bit of a gamble in the same way as delaying annuity purchase in the hope that annuity rates will improve is potentially counter-productive. I’m very encouraged to see those approaching retirement take a broader view, and anticipate joint annuity purchase to increase further going forward.  I also hope that this will act as a further trigger to encourage more people to explore the open market option.”
More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.