Annuity buyers are getting a bad deal because companies are selling them to make profit margins of almost 20%
Some insurers only sell to captive savers and don't look for new business and can make more than this.
Standard Life is one of the only companies that discloses the profit margins on annuities, other insurers would not do so. They made a margin of nearly 19% on annuities in 2011. Margins on other lines of its business were much smaller at 0.3% on individual pensions, 0.7% on savings and investments and 5.2% on its insurance business.
There are good reasons to think that other insurers make more. Standard Life sells annuities to savers that have built up their pension pots with another company, and sells to existing customers who didn't shop around.
Gill Alton runs Alton Property Partners, offering a residential investment property service to help you build a portfolio for a secure financial future. Alton Property Partners provides a comprehensive and personal Property Portfolio Building Service for buy to let investment in the UK. Gill believes that property as a pension could be the answer. She says:
"Given the tremendous downward pressure on annuity rates it seems almost criminal and certainly unethical for Annuity providers to cash in so extensively at the expense of the Retiree. As this article clearly demonstrates annuity providers seem to think little of their loyal customers, who have built their pension pot up with them - rather taking advantage of the lack of competition and offering lower rates.
"Of course profits made by companies ultimately keep people employed, but at the expense of an individual who has worked hard their whole life and has no choice but to tie themselves to an annuity rate that will impact the whole of their remaining life.
"There has to be a compromise.
"On a personal level the more you are able to diversify your pension / retirement income so that you are not 100% reliant on an annuity the better, then your retirement is not governed by a committee dictating what percentage of your income they require to maintain the business.
"Property investment offers a real retirement income alternative which negates the need to get caught up in purchasing an annuity. By investing in property you don't have to share your hard earned money with a large faceless corporate.
Notes to Editors
Gill Alton is the founder of Alton Property Partners, which provides a comprehensive and personal Property Portfolio Building Service for buy to let investment in the UK. Alton Property Partners manage the entire investment process, from sourcing property at a discounted value, co-ordinating the Mortgage, arranging the refurbishment, right through to ensuring it is ready for the rental market
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