So I’m 48, 15 months older and I’d be able to buy an annuity-but they’ve paved paradise and I’ll have to wait till 2016 which sucks.
Paradise for this child of the seventies is a gilt-edged promise of income for life and “we’ve never had it so good”. Britain has an efficient annuity market with low distribution costs and strong competition arising from compulsory annuitisation from private pensions.
Academic research suggests where annuities are compulsory,insurers are proteced from self selection and can offer better mortality terms. Since the introduction of income drawdown, we have seen the richest (potentially the longest living cohort) defer annuity purchase which has further improved annuity rates by concentrating annuity purchase at normal retirement age on the less well pensioned (and shorter lived).
The rich are perversely selecting against themselves!
Were I 15 months older, I would be taking advantage of these “super-rates” and I suggest that there is an opportunity, especially where small DB schemes see liabilities dominated by a handful of pensioners in payment to buy such members out (subject to approval from the Regulator).
But here’s the rub. Those beastly bureaucrats in Brussels are insisting that insurers from 2012, increase protection for annuitants to an extent that these super-rates disappear. Insurers suggest that the impact of EU Solvency ii will be to reduce annuity rates by as much as 20%.
They’ll pave paradise and put up a parking lot.