CONTACT Tel: 028 9068 6168 Fax: 028 9066 6932 Email: info@theopenmarketannuityservice.com The Open Market Annuity Service is an appointed representative of Kerr Henderson (Financial Services) Limited which is authorised and regulated by the Financial Services Authority.
Contents 5
The Open Market Annuity Service What we offer
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Trustee and scheme sponsor responsibilities What are the issues? Why the rush? All inclusive Have it your way
8
The end-to-end solution Attention to detail
9
Online support and information supply Not just another quotation website
10
Open market options
The benefits of shopping around
11
The impact of making the wrong
provider selection
5
The Open Market Annuity Service The Open Market Annuity Service is a specialist annuity broking service offered to clients.
Choosing the right annuity can have a substantial impact on the income a member receives in retirement. The aim of this service is to help members understand the options open to them in their drawdown phase of retirement planning - when the individual is transitioning from a work to retirement lifestyle. It will also help members select the type of annuity that they need and the best value annuity in the market.
The Open Market Annuity Service has been developed using the very latest technology to deliver a market-leading annuity service. The Open Market Annuity Service is constantly evolving, ensuring clients continue to receive the very best of what is available in the marketplace.
What we offer Many people are surprised when they realise the difference there can be between rates offered on the Open Market. Some people have found that they have been able to increase their income by as much as a third by shopping around for their annuity. (Source FSA January 2008, ”Just the facts about your pension – It’s time to choose”).
It is estimated that up to 50% of retiring UK pension scheme members do not shop around for the best terms available when buying their annuity. (Source HM Treasury December 2006, “The Annuities Market”).
The Open Market Annuity Service represents a complete annuity purchase solution for trustees of occupational schemes and for contract–based arrangements. It has been specifically developed to balance scheme disclosure requirements with practical constraints such as time and costs. Quite simply, we believe that this service offers more member benefits than any other within the marketplace. It is focused on making sense of annuities—not making sales.
7
Trustee and scheme sponsor responsibilities When considering an annuity service and fulfilling the trustees’ duty of care, one of the most important decisions to be made is how much information is supplied to the scheme member.
Why the rush?
Historically, this has been limited to either showing a very small number of options or directing them to a recommended annuity supermarket and letting them fend for themselves.
All too often it seems that other annuity service providers push members into making a final, irreversible decision without fully explaining the options available to them. We believe the members should make their choice when they are ready. Our high service standards apply to all scheme members regardless of the value of their retirement fund.
What are the issues?
All inclusive
Research has shown that when presented with a small number of annuity options, the vast majority of scheme members choose one of the first options they are shown without fully investigating the alternatives.
The Open Market Annuity Service is designed to present scheme members with everything they need in one comprehensive report. Individuals can easily assess the costs and benefits of each option and make an informed choice.
Most annuity supermarkets rely completely on the technological capabilities of the individual annuity providers. Any break in these provider services would result in an incomplete survey of current market rates.
Behind the scenes, full audit trails are maintained to ensure records exist for everything the members view prior to making their final decision.
Many competitive annuity providers have not developed the required systems to integrate with these online supermarkets. This means that the most competitive provider may not always be quoted. These constraints represent an unnecessary level of risk, which many trustees and scheme sponsors feel is unacceptable.
Have it your way The Open Market Annuity Service can offer a range of information options which can be selected to best suit the needs of the scheme and its members. Scheme rules and preferences can be accommodated to ensure the member is only presented with relevant choices. The Open Market Annuity Service can operate on a paper–based, web–based or combined deployment and trustees have a range of competitive charging options from which they can choose.
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The end-to-end solution
Online support and information supply
Attention to detail
The Open Market Annuity Service provides an unrivalled depth of member–specific illustrations and information. We’ve recently introduced a new service, the Online Annuity Assistant, which is a versatile and unique resource that allows members to make an informed choice of the annuity options which suit their circumstances. Access details are included within the Pre-Retirement Pack, allowing them to start using the resource immediately.
The output from the Open Market Annuity Service is second to none. Comprehensive research is packaged within a simple report format, providing scheme members with everything they need to make an informed choice. Our member–specific guidance notes present up-to-date annuity information alongside graphs and charts to help explain the financial impact of each choice. The scheme members make their selection by completing a simple tick box form. Standard, smoking, enhanced and impaired rates are catered for within the normal service. Trustees and employers can select the depth of information they would like presented within the member communications. Where required helpline assistance and independent financial advice can also be provided.
Tools range from simple decision trees to detailed cost/benefit analyses. We let members choose the tool which best suits their needs. When they are ready, members can use this resource to inform us of their choices and instruct us to proceed with the annuity purchase. The Online Annuity Assistant can act as the primary route for members to instruct us of their choices, or as a valuable addition to the paper-based Pre-Retirement pack.
Not just another quotation website Members can keep track of changing annuity rates, investigate the impact of varying their pension commencement lump sums, identify the true benefits of escalation options and much, much more.
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Open market options The benefits of shopping around
The impact of making the wrong provider selection
The UK annuities market is complex and ever-changing. The graph below illustrates a typical cross section of open market annuity rates for purchase prices ranging from £10,000 to £100,000 and for one type of annuity.
The tables below contain some typical annuity results for annuitants aged 60 (assuming a £50,000 purchase price). We illustrate the difference between the best and worst results from our annuity panels.
Each annuity provider is represented by a different coloured line. As you can see, no one provider is consistently best at all purchase prices.
Male aged 65 assuming a level annuity, single life with 10 year guarantee*
Better
Assuming a level annuity, single life with 10 year guarantee Male
Female
Best
Worst
Difference
%
Best
Worst
Difference
%
£3459
£2876
£583 p.a.
20.27
£3317
£2609
£708 p.a.
27.14
Assuming a 5% escalating annuity, single life with 10 year guarantee
Effective annuity rate
Male
Female
Best
Worst
Difference
%
Best
Worst
Difference
%
£1892
£1729
£163 p.a.
9.43
£1734
£1502
£232 p.a.
15.45
DATA COMPILED BY THE OPEN MARKET ANNUITY SERVICE ON 01/06/2008
If you compound this difference year on year, the member could miss out on thousands of pounds of income simply by choosing the wrong annuity provider.
Worse 0
20,000
40,000
60,000
80,000
100,000
120,000
Purchase price (£)
DATA COMPILED BY THE OPEN MARKET ANNUITY SERVICE ON 01/06/2008
*It should be noted that a different annuity basis and/or a different individual would produce a completely different graph.
CONTACT Tel: 028 9068 6168 Fax: 028 9066 6932 Email: info@theopenmarketannuityservice.com
CONTACT Tel: 028 9068 6168 Fax: 028 9066 6932 Email: info@theopenmarketannuityservice.com The Open Market Annuity Service is an appointed representative of Kerr Henderson (Financial Services) Limited which is authorised and regulated by the Financial Services Authority.