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The Argument Against Annuity Rate Tables and Calculators

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Also, Read What The FSA Says About Annuity Tables

Understanding pension annuities

You may already have visited other annuity sites and used a rates calculator or consulted an annuity rate table.

10 quick questions...

Did you also consider capped drawdown?

Were you sure that the information about the range of annuities was up to date?

Did the annuity table or calculator take into account all products on the market (and their alternatives) or was it just a selection?

Did you know that specialist annuity brokers may have access to a wider range of annuity possibilities?

Did you receive an individual annuity quote or was it just an illustration?

Did the website promote particular annuity providers over others as they were paid higher commissions by some partners?

Are the annuity providers able to pay to list their products higher up the tables?

Are the annuity providers able to have their products portrayed in a different way?

Did they make it clear that the annuity rates may change before your application actually goes through?

If you received a quote, was it guaranteed?

Updated by machines or humans?

Did those sites use 'screen-scraping' technology that retrieves and transfers annuity rates information from other programmes?

According to Wikipedia, "Screen scraping is generally considered an ad-hoc, inelegant technique, often used only as a "last resort" when no other mechanism is available. Aside from the higher programming and processing overhead, output displays intended for human consumption often change structure frequently. Humans can cope with this easily, but computer programs will often crash or produce incorrect results."

But what if the site reassures you that it's up to date?

Even if the annuity table or calculator was 100% up to date and the rates were correct, were you aware that the stated annuity rates may have no resemblance whatsoever to the pension income that you will actually achieve? This is because your annuity may increase due to circumstances as yet unknown to the site, i.e. your state of health, medication that you may be taking and whether you're a smoker or not. Some annuity providers even base your future income on where you live or your previous occupation.

Again, let's say that you do eventually find a website where everything is up to date and works correctly; do you know at this stage whether you want a level annuity, fixed-rate escalating annuity or an rpi-linked escalating annuity? Also, have you considered your spouse's, partner's or dependant's percentage on your demise?

What does the FSA say about comparison sites?

Comparison sites have been heavily criticised in the media and by the Financial Services Authority (FSA) for their lack of independence and incomplete information. Consumers often don't realise that they are not getting the complete picture.

The FSA say "Some may only include products that the website can make money from in some way, for example if you click through to the provider." They also state that you should never buy a product just on the basis of what you see on their own money made clear FSA Tables. They recommend getting advice even before using their tables.

(Please note that the information about annuities and annuity alternatives on this page does not represent financial advice. You must consult an FSA registered annuity broker for complete information. "The argument against annuity rate tables and calculators" is an opinion only and you should not rely on this information to make (or refrain from making) any decisions about buying an annuity.)

FSA Gov UK Tables and Sites

Financial Services Authority | FSA Gov UK Tables | FSA Annuity Tables | FSA Register | FSA: Money Made Clear

Pension Annuity Providers:

Why use a pension annuity broker?

1. An annuity broker may be able to secure a better annuity deal than you may be able to achieve.

2. A broker is more likely to have access to a wider range of annuity possibilities than you.

3. Due to their ongoing relationships with annuity providers, they may be in a better position than you to overcome any problems which may arise with your application.

4. You will have an expert point of contact should anything go wrong or need prompt attention.

5. They work to a set of guidelines laid down by the FSA who regulate annuity brokers' policies and working methods.

6. Annuity brokers have got an interest in recommending the correct product for your particular circumstances. They will not wish to fall foul of stringent FSA annuity regulations.

7. If you choose not to get FSA registered annuity broker advice, you may not be able to get compensation through the Financial Services Compensation Scheme if you have a future complaint about the recommended annuity.

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