Joint annuities typically provide an income that is 6.5% lower than an equivalent single annuity for non-smokers and 7.7% less for smokers, according to data from IRESS’ Exchange. As a result, 61% of advisers polled at IRESS’ autumn 2013 Retirement Roadshows state consumers are opting for single life products with the best rates, rather than those that are most suitable for their financial position.
A further 27% attribute the sales gap to a lack of consumer education on the merits of joint annuity products prior to meeting with an adviser. One in eight (12%) advisers cited a fundamental lack of co-ordinated financial planning between couples.
Not surprisingly, two thirds of advisers (67%) have seen demand for joint annuities remain level during 2013. However, some progress is being made, with three times the number of advisers (25%) having seen the demand for joint annuities rise than have seen it fall (8%) in 2013. Additionally, while joint annuities still account for a minority of annuity sales for half of advisers, one in five (22%) now see joint life annuity sales accounting for more than three quarters of their total annuity sales.
Dave Miller, Head of Portal, IRESS UK, said:
“There are signs of progress emerging in joint annuity sales. But there is still a clear annuities gap for retired couples that must be closed to prevent thousands from being financially exposed in retirement each year, given the disparity in life expectancy between the sexes. With annuity rates far from sky high, many consumers may have been tempted to look for as large an income as possible by opting for a single life annuity, but solely focussing on the headline rate can mean that the most appropriate products for their households are overlooked. Retirement planning needs to be approached in the round, and the value of education from advisers in this process cannot be understated.
“We have seen signs of a recent improvement in annuity rates but our data shows providers also have an opportunity to support joint annuities by improving the rates available to customers who need them.”
