Nationwide has become the first high-street lender to offer its customers advice on buying an annuity. The new service, which was launched by the building society this week and is available through its branches, is aimed at retirees with smaller pension pots of £18,000 or more.
It provides access to a panel of six annuity providers currently Legal & General, Aviva, LV=, Partnership, Canada Life and Just Retirement. According to Which.co.uk, these providers account for 88% of the annuity's market place. Nationwide will be paid via commission payments from the insurer, rather than by an up-front fee, although these payments will be "fully disclosed", according to the building society.
This looks like good news to us. Nationwide is one of the few high-street finance brands to escape the financial crisis with its reputation relatively unscathed. As Jeff Prestridge notes in The Mail on Sunday, statistics from the Financial Ombudsman Service on its complaints handling back this up. In the last six months of 2011, Barclays and Lloyds, for example, had more than 90% of payment protection insurance (PPI) mis-selling claims against them upheld. Nationwide's figure was just 7%.
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There's no doubt this service is needed. A recent report by the National Association of Pension Funds notes pensioners could boost their earnings by 20% during retirement by shopping around for annuities rather than settling for one from their pension provider. Yet one in three fail to do so and miss out on the potential extra income. Retirees with smaller pension pots tend to be hit hardest because they are even less likely to seek advice on annuities or to spend time researching the best deals.
Given that the average national pension pot is worth around £25,000, it's likely that the new service could provide much needed assistance for many new pensioners in the UK, says Which.co.uk. Nationwide's telephone-based advice service will also ask customers to disclose information about their lifestyles and medical histories to see if they could qualify for an enhanced annuity. These pay higher income rates based on lower life expectancy. It's thought that around 40% of newly retired people could qualify for an enhanced annuity.
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