Following on from a recent article on annuities, I’ve got some interesting feedback, including a remarkable post on the Pension Play Pen linked-In group from Magdalena Cooper de Neuze who is an insurance broker in Jamaica
I hope that those who are thinking about the Guidance Guarantee, either as Trustees of DC Plans or as potential members of IGCs or within Government , can spare a few minutes to read the comment which explains in simple terms how people can understand annuities.
I disagree that annuities are not understood by most people.
What has been difficult for professionals is that they do not make the immediate link in their presentation between saving for retirement and the income which is paid through an annuity. What we have done consistently is to replace the word annuity with ‘pension’.
We have done this for so long that we do not know the word ‘annuity’ and how to use it in our professional discourse with our prospects and clients. We need to start saying that its the annuity which provides the pension i.e. guaranteed lifetime income.
In fact yesterday I had to do some explaining to a gentleman who had no knowledge about annuities and by the time I had completed my discussion with him he knew the word annuity and what it meant. I guess that if I am asked to give his name and contact number someone can call him to test what I have stated!
I am a firm believer that professionals must use their terms and explain to the non-professionals. But professionals cannot be using the same terms as the public! Yes, the word annuity may be difficult for some people to pronounce BUT when they realize that it provides a guaranteed lifetime indexed income they start to pronounce it very quickly and correctly.
As professionals we need to take responsibility when situations like this arise and work together on how to resolve it i.e. how to explain it better to the public. Mr. Tapper you posed a great question and comment.
I am also of the opinion that the explanation of the various annuity options which are available at retirement (disability, old age and death) are not well explained by professionals to clients.
I do believe that the selecting of an annuity option is a very important event in one’s life and really needs a specialist to assist the client to make an informed decision.
It is not a quick and ready selection without certain facts of the client being discussed. I have developed my own approach and questions which I ask before the client signs off on their selection.
I take about an hour with a client who is making this decision. If its a wind-up of a Superannuation Fund I make group presentations and allow for many questions so that the Plan Members can understand what annuities are all about when a fund is being wound up.
There are times when I ask Plan members to invite their spouse or adult child. I recall one presentation and an employee remarked ‘why didn’t the initial person who sold them the Superannuation Fund advise them of the end result i.e. annuities’.
So I think we have a lot of work to do to communicate what we do in offering retirement savings plans to the public. Our most important work today is to find ways to communicate annuities effectively and to demonstrate how others have been benefitted with not only their own income needs but also how an annuity provides for generational wealth through guaranteed income.
If anyone would like me to share Magdelena’s profile with them, please contact me at firstname.lastname@example.org