It’s easy to forget in a world of “pension freedom” that millions of British savers purchased annuities with their pension pots in the 40 years prior to the day George Osborne announced “no one will ever have to buy an annuity again! In the years running up to 2014 only one in ten people were able to use drawdown rather than annuities.

The vast majority of annuities purchased were from non-workplace pensions sold by financial advisers (like me). Back in the day, these annuities helped, but not by very much. And the majority of them were purchased without the help of those advisers at the highest rate possible, that meant buying a level annuity on a single life basis.

In 2012 and 2013, 750,000 annuities were sold by ABI members, but less than one in three of these annuities were sold to the household, around 70% were sold on a single life basis, meaning that the annuity died when the annuitant did.

At the time, the talk was of uncompetitive markets and the need to shop around. Looking back, perhaps the bigger social problem is that over two thirds of annuities were purchased by men leaving many couples with a “cliff-edge” financial position if the male annuitant died before the partner.

Very little research has been done on the financial consequences of this, but it seems likely that a large number of women who had relied on annuity income, are likely to be suffering today – suffering made worse by the cost of living crisis.

One of the very positive aspects of the FCA’s new consumer duty is that it will require financial services companies to know their customers better and to empowering them  to make good financial decisions and avoiding foreseeable harm at every stage of the customer relationship.

At a meeting of financial services companies , hosted by the DWP and Pension PlayPen, I’m going to be asking that companies with large individual annuity books , talk with their annuitants – especially those with single life annuities, about bereavement and the impact on the household if they die. Of course, this is a difficult conversation, many single people don’t want to be reminded they have no one to grieve them, so this will need to be done sensitively.

But for those annuitants who are in households with a partner, planning ahead is important, tough though this is , to think about or talk about.

The focus of the meeting we are having is on the availability to many households of pension credit and the point at which a pension credit claim is triggered. Often a claim is triggered when a single life annuity comes to an end and the surviving spouse sees the household income fall below the minimum level for a single person’s eligibility for this means-tested benefit.

I will be arguing that everyone who reports the death of a a single life annuitant to a life company, or the next of kin if known, is made aware of the opportunities from the state, especially pension credit.

This is not the glamorous end of pensions engagement. This is not the fun stuff, riding round on busses (great as the Pension Geeks work is), this is about caring for long-standing customers – literally beyond the grave.

But it is vital work and work that insurers should be well-financed to do. Annuities are the main driver of the corporate profitability of our large insurers. If any part of their vast client empire is vulnerable to compliance risk against the consumer duty, it is their annuity books. Annuitants are both rewarding and potentially a risk – the risk survives the death of the annuitant and rests with the surviving partner. The good news is that the financial consequences of an annuity dying can be mitigated by pension credit. Pension credit is the annuity company’s friend. It is proper social insurance.

Returning to the ABI stats prior to the introduction of pension freedoms, I am struck by the tiny size of the average annuity. The average (mean) annuity in 2013 was bought with a pension fund of around £35,600; but the median was around £20,000, so half of people bought  an annuity with less than this.

This chart shows not just the average purchase price, but the prevalence of single life annuities bought by people with small pots. The sad fact is that 70% of single life annuities were purchased for less than £30,000.  While over half the joint life annuities were also below £30k as a purchase, they form a much smaller part of the picture. Most people with small pots – a proxy for those with low income, could not or would not afford partner protection.

In 2013, a pot size of £30,000 would have bought a healthy persona a single life (level) annuity of £120 per month.

This may seem insignificant to people earning thousands of pounds a week, but – (as Sarah Pennells and her dogs are finding out this week) , when you left with only the state pension to live on . For those with little else the annuity is pretty important.

Losing anything from £20 to £120 per month is usually a major blow to a surviving partner , but the upside may  be that a pension credit claim is triggered. We must increase awareness of the Pension Credit Lifeboat and encourage surviving partners when a household loses its annuity income, to make a claim.