There is a thirty-one percent difference between best and worst conventional annuity rates, a 46 percent difference between best and worst enhanced rates. This equates to £14,000 more lifetime income on an £18,000 pension pot.

The Annuity Window is not a shopping around tool. Pre-retirement communications still need to be improved. The ABI Annuity Window is now up and running, showing the best and worst rates of their insurance company members. This transparency is a welcome addition to the annuity market. It illustrates the gulf that exists between the best and worst rates, and how much pension savers stand to benefit from shopping around. Laith Khalaf, Head of Corporate Research: “The Annuity Window lifts the lid on just what rates insurance companies are providing. It is a positive step forward and is likely to lead to more pressure on those companies offering low annuity rates. It also illustrates how consumers can benefit from the simple step of shopping around at retirement. The keystone to improving pensioner incomes is encouraging more people to do this, which rests on improving the communications sent to pension members before they retire.”

The difference between the best and worst rate for a conventional annuity is 31 percent, with Reliance Mutual offering the top rate and Scottish Widows offering the lowest, according to the Annuity Window (based on a level annuity for a 65 year old man, living in the Manchester area ). On a purchase price of £18,000 this means the difference between receiving £1,100 a year and £840 a year. Over a 25 year retirement that would be an extra £6,500 income paid out. The difference between the best and worst rate for an enhanced annuity is 46 percent, with Prudential offering the top rate and Friends Life offering the lowest, according to the Annuity Window (based on a level annuity for a 65 year old man, living in the Manchester area, who smokes and has lung disease).

On a purchase price of £18,000 this means the difference between receiving £1,778 a year and £1,214 a year. Over a 25 year retirement that would be an extra £14,100 income paid out. It is estimated that 70 percent of people could qualify for an enhanced annuity (source: MGM Advantage). It is important to recognise the Annuity Window is not an annuity shopping around tool for consumers for a number of reasons: rates are several weeks old; there is no mechanism for customers to apply; there are also obviously only a limited number of profiles modelled which don’t take into account anyone’s individual circumstances precisely, or the type of annuity they want; some of the companies only offer the quoted rates to their existing pension members, not on the open market (e.g. Reliance Mutual don’t offer non-smoker rates on the open market). If customers wish to shop around for an annuity there are plenty of places where they can get already get guaranteed, live rates such as www.hl.co.uk/pensions . “These contracts result in significant earnings insecurity, with workers often only being told how many hours they will work at very short notice, while at the same time being expected to be on call to work if they are needed. Union leaders have called for the contracts to be outlawed entirely, Dave Prentis, general secretary of Unison, arguing that such contracts hark back to the times when people would stand at the factory gates waiting to be picked for a day’s work. He has also highlighted that many people on zero-hours contracts are on the lowest wages in the economy, making them the least able to cope with financial shocks such as a cut in hours from one week to the next. Zero hours contracts also make financial planning all but impossible. It is difficult to get a loan, a mortgage, a credit card or a tenancy agreement if you are not able to provide proof of earnings.

“From the employer’s point of view, however, such contracts provide ultimate labour flexibility, enabling them to keep labour costs down by matching staffing to demand as closely as possible. That said, while this clearly has significant cost saving potential in the short term, it is difficult to see how businesses can build motivated workforces that are committed to the goals of the business when they are employing staff in such a manner. “Given how far the benefits of such contracts are weighted towards employees, this is testimony to where the balance of power in the employment relationship lies. Employees have no means by which to resist such contracts (given the weakness of unions in the private sector in particular) and the only option for many to such contracts is the prospect of unemployment.

“What is notable, though, is that the Chartered Institute of Personnel and Development’s figures showed that such contracts are becoming even more widespread in the public sector than the private sector. Indeed, while 17 per cent of private sector organisations in the CIPD’s research stated that they used such contracts, the figures were 34 per cent for organisations in the voluntary sector and 24 per cent in the public sector. This is more than likely a reflection of the increasing pressure local authorities are under to respond to budget cuts, requiring even tighter tenders for outsourced contracts, for example.”