UK Annuities: FINANCIAL CONDUCT REGULATED SITES • QUALIFIED, TRUSTWORTHY ANNUITY ADVICE

Centralising Your Pension Annuity Search

BUT FIRST, SOME IMPORTANT INFORMATION THAT COULD BOOST YOUR RETIREMENT FINANCES Have you taken out a credit or store card, mortgage, secured loan, unsecured loan or hire purchase agreement in the last 10 years? If you have (or have had) a mortgage, loan or credit card with providers such as Barclaycard, Abbey, Santander, Littlewoods, MBNA, Halifax, HSBC, HBOS, Lloyds, Natwest, RBS or in fact any other credit provider, you may be able to reclaim up to £15,000 if you were sold PPI insurance - in most cases even if you have lost the paperwork. Learn more about PPI Claims now!


annuity comparisons Visit Open Annuities

You could increase your annuity by thousands. Make sure you recognise the best annuity advice when you get it. The more information about annuities you have, the more able you will be to recognise the best annuity advice when you receive it.
Visit Open Annuities Financial Services Register Number 530750


Annuity Plan Visit Pension Annuity Plan

You may be able to secure several thousand pounds more over your lifetime from annuity providers than your current pension provider. Many are unaware of this very important information. The more information you have, the more able you will be to recognise the best deal when you see it.
Visit Pension Annuity Plan Financial Services Register Number 530750


annuities plan Visit Annuities Plan

All fund sizes welcomed. Why should the annuity buyer be careful? Buying from your pension provider isn't always necessarily the best idea.
Visit Annuities Plan Financial Services Register Number 530750


annuity comparisons Visit Pension Annuity Planner

This company may be able to increase your standard pension annuity through enhanced annuities.
Visit Pension Annuity Planner Financial Services Register Number 530750


annuity comparisons Visit Annuity Base

Using specialist annuity industry search software, an FCA registered Independent Financial Adviser will query top annuity and annuity alternative providers' databases to help you compare and choose which one is the best for you.
Visit Annuity Base Financial Services Register Number 530750


annuity comparisons Visit The Enhanced Annuity

Specialists in enhanced annuities. It is estimated that up to 40% of the UK population could boost their pension annuity income with an "enhanced annuity".
Visit The Enhanced Annuity Financial Services Register Number 483817


annuity comparisons Visit Annuity Comparisons

Why would you use an automated annuity comparison website when an authorised, qualified pension consultant can advise you which is the best annuity for free with no obligation to buy? There are many reasons why you should not trust your future income to comparison tables on faceless sites. In some matters you need absolute certainty.
Visit Annuity Comparisons Financial Services Register Number 483817


annuity comparisons Visit Annuities Extra

Pension annuities for those of us who are not in the best of health. If you've a health problem, no matter how small or insignificant you think it is, you'll stand an increased chance of a higher annuity income.
Visit Annuities Extra Financial Services Register Number 483817


annuity comparisons Visit Simple Annuities

Finding an annuity does not have to be difficult. Pension annuity retirement finance experts with vast experience of annuities are waiting to help you. Compare pension annuities and annuity alternatives now.
Visit Simple Annuities Financial Services Register Number 483817


annuity comparisons Visit The Female Annuity

1000's of women retire every week in the UK. Compare annuities for women and their alternatives.
Visit The Female Annuity Financial Services Register Number 460094


annuity comparisons Visit Annuity Pathway

Your simple pension annuity journey. How you might take the wrong annuity route and lose the annuity income that is rightfully yours.
Visit Annuity Pathway Financial Services Register Number 460094


annuity comparisons Visit Just One Bite Annuities

How a pension annuity will affect your life. You will only get one bite of the annuity apple. Once you buy an annuity, there's no going back.
Visit Just One Bite Annuities Financial Services Register Number 460094


annuity comparisons Visit Pension Annuities Plus

Your annuity income may increase if you have had certain conditions such as high blood pressure, asthma or high cholesterol. This is also true for smokers and for those who have worked in certain occupations. Get pension annuity comparisons now.
Visit Pension Annuities Plus Financial Services Register Number 483817


annuity comparisons Visit Annuity Answers

Why should the pension annuity buyer beware and why do so many retirees ignore a much bigger annuity income? Compare annuities now.
Visit Annuity Answers Financial Services Register Number 483817


annuity comparisons Visit Smokers Annuities

Your lifespan as a smoker and your annuity options. We're sorry to be blunt, but you most likely already know that smokers, in general, have shorter lifespans than non-smokers. Of course annuity providers are well aware of this unfortunate fact of life. Increase your annuity now.
Visit Smokers Annuities Financial Services Register Number 483817


annuity comparisons Visit Annuity Key

Unlike some companies, all fund sizes are accepted. The Retirement Income Customer Hotline Limited may be able to boost your pension income by more than 40% compared with your current pension provider's offering.
Visit Annuity Key Financial Services Register Number 460094


annuity comparisons Visit Buy an Annuity

Buying an annuity from your pension provider isn't always necessarily the best option! You might be able to secure several thousand pounds more over your retirement from annuity providers than your current pension provider.
Visit Buy an Annuity Financial Services Register Number 154622


annuity office Visit Annuity Office

We recognise our annuity clients as individuals, which is why we deal with every case on a one-to-one individual basis. Did you know for instance that your income may increase if you have had certain health problems such as high blood pressure, high cholesterol or asthma? This is also true for smokers and for those who have worked in certain occupations.
Visit Annuity Office Financial Services Register Number 483817


ANNUITIES: Annuities News


Pensions and Annuities Research:

Justice delayed:

The Ombudsman's report on Equitable Life Annuities

- Public Administration Committee Contents Memorandum from Peter Scawen, Equitable Life Trapped Annuitants (ELTA) (EQL 05) 1) EXECUTIVE SUMMARY 1) The purpose of compulsory annuity purchase is to require individuals to secure a safe and reliable income for retirement when, crucially, they will be unable to supplement their income from alternative sources. Since this is a key statutory requirement that an individual MUST buy an annuity, it follows that the regulating authorities have an absolute obligation to ensure that the products offered on the market can meet that statutory objective. Any failure to do so must inevitably result in a justified claim for mal-administration. 2) The With-Profits annuity ("WPA") was a particularly complex financial product, poorly understood by the annuitants who purchased it and many of Equitable's representatives who sold it. It was predicated on the belief that the Equitable Life Assurance Society was a properly regulated, blue chip, institution of sound financial standing. Annuitants would not have purchased the product had they believed otherwise. More than any other product the Equitable's finances were key. Without its apparent financial strength, the product could not have been sold. 3) Three core issues differentiate with-profits annuitants: (a) their inability to surrender the policy or transfer it to another provider; (b) the importance of the purchase in the context of providing a safe and reliable income, when the individual's abilities to find replacement income were increasingly remote; and (c) the increase of their losses as they get older because of the central role of the increasing, but un-guaranteed terminal bonus that was required to maintain their retirement income. 4) The WPA was deeply flawed as a source of retirement income. Probably it could never have delivered what it promised. The risk annuitants were invited to accept was the risk of the market, hedged by Equitable's (allegedly) superior financial management and adequate reserves to support a smoothing policy. In fact there were no reserves to cover terminal bonus policy, no smoothing policy and Equitable was managed incompetently. The ever-increasing gap between the "guaranteed" annuity and the total annuity was not covered by reserves, nor did it feature as a liability in the accounts and statutory returns. It could therefore only be met either by an ever increasing sales effort, so that new investments were required to meet the obligations of the old, or, as occurred from November 2002, by not paying it. In effect, Equitable created a pyramid scheme. 5) There was a significant failure of regulation. It was the responsibility of the regulator to ensure that the products on the market were in fact capable of delivering what they were offering, since annuitants are reliant on the regulator to carry out the sort of tests that lie beyond the competence of the general public. 6) The Ombudsman's three critical findings that the information on financial standing was incomplete, that liabilities were understated, and that the solvency position was not appropriately verified leading to a misleading picture of the financial health of Equitable, mean that the clear injustice sustained by With-Profits Annuitants was the purchase of a product, which, without this mal-administration, they would not have purchased. 2) INTRODUCTION I was an Equitable with profits annuitant. I have been involved in this matter for five years. I developed the original computer model, which disclosed to the public for the first time the characteristics of the WPA, its features, limitations and risk factors. I established ELTA (Equitable Life Trapped Annuitants), which has some 2,500 policyholders and subsequently became the Chairman of ECL (ELTA Claims Ltd), a single purpose company established to manage the recent litigation against Equitable Life on behalf of some 400 annuitants and in conjunction with Clarke Willmott (CW) acting for the plaintiffs. The model has been substantially enhanced as a result of the recent litigation, as a consequence of which I have discussed, argued, pondered and considered it from every angle imaginable with considerable input from fellow directors of ECL, many With-Profits Annuitants, lawyers, leading QCs and actuaries. Arguably I, and Paul Chapman (of CW) are probably the most knowledgeable (non-actuarial) people there are on the subject of WPAs. Broadly speaking the actuarial experts to the litigation on both sides were in agreement as to the mechanism of the WPA and nobody, so far as I am aware, has disputed the arithmetic basis of the model that I developed and on which this analysis is based. Further, both sides broadly accepted the actuarial calculations that established the quantum of losses for the plaintiffs, though some of the numbers, such as future discount and bonus rates were not. These would have been resolved at trial although, as is well known, a settlement was reached between the two parties prior to the court hearing on confidential terms. It is on the basis of those quantum calculations that we have estimated the losses for With-Profits Annuitants illustrated in Section 6. Outside of Equitable Life, probably nobody else has that expertise and these issues affect directly not only how With-Profits Annuitants should be compensated but, more importantly, the quantum of any compensation. 3) ANNUITY BASICS Ordinarily, pension annuities are purchased between the ages of 50 and 75. Broadly, it is compulsory to use the pension funds to purchase an annuity. Self evidently, as individuals get older, their earning capacity diminishes. Therefore, the purpose of compulsory annuity purchase is to require individuals to secure a safe and reliable income for retirement when, crucially, they will be unable to supplement their income from alternative sources. It may be stating the obvious, but since it is a key statutory requirement that an individual MUST buy an annuity, it follows that the regulating authorities have an absolute obligation to ensure that the products offered on the market can meet that statutory objective. Any failure to do so must inevitably result in a justified claim for mal-administration. It is not widely appreciated that a life company writing a conventional non-profit annuity calculates with the aid of its actuaries, etc, the size of "the fund" based on its forecast for likely investment returns and the personal characteristics of the annuitant, (sex, age, social class, education, geography, etc). When an annuitant gives a lump sum, the consideration money, to the Society, in effect what the Society does, is perform a calculation whereby the money is invested in a spread of products, Equities, Gilts, etc, makes a judgement of future returns over the lifetime of the annuitant, deducts expenses, profits and sets aside a small reserve, and converts the remainder ("the fund") into a series of payments. This is true whether the annuity is a level, RPI linked, or escalating at a fixed rate. The consequence is that the same amount of money from "the fund" will be distributed, just in different ways. So, irrespective of what type of annuity chosen, the total amount of money received in annuity payments will be more or less exactly the same. All that happens is that the payments are staged differently over time. In theory, if the starting conditions remained the same throughout the duration of the annuity and the annuitant died exactly as forecast in the actuarial life tables then, on the day the annuitant died, "the fund" would become zero. Obviously if an annuitant dies early, the life company makes a "profit" and if the annuitant lives longer than planned then the life company makes a "loss". If the provider gets it right, the losses are matched by the profits. And of course, starting conditions do NOT remain the same. However, in the case of fixed escalating or RPI-Linked Annuities the starting income for the annuity is substantially lower than the benchmark annuity—the fixed level annuity. This was a major marketing deterrent, which the Equitable WPA was designed to overcome. The WPA at its inception provided an income equal to, or in some cases, above the fixed level annuity. This feature, plus the "promise" of additional growth, made them a very attractive product for potential annuitants. It achieved this by allowing the annuitant to anticipate future growth, so that effectively receiving tomorrow's bonus today. This exercise, however, was dependent on the Equitable having a culture of sound management and adequate reserves, so that it could withstand dips in the investment market without reducing the annuity income. (Without that, it was doomed to failure and at some point drastic drops in the payments received, but with no chance that the annuitant could surrender the contract.) Annuitants understand that if you invest in a product that relies on investment to produce growth, then your returns will be dependent in part at least on the markets, be they investment in Equities, Gilts, Cash, Property, or any other investment mechanism. What they could not understand was the "provider risk" represented by the finances of Equitable itself, rather than the markets. Every annuity type involves some form of risk judgement that the annuitant has to make: — With a Fixed Level Annuity, the risk relates to inflation. Even a modest 3.5% rate of inflation means that your money more or less halves in value over 20 years, a relatively short time-span in today's world, where people retire at 55 and hope to live well into their 80's. — With an Escalating Annuity, growing at some fixed rate, then the annuity starts low, but steadily increases so that late on in the annuity the payments are very high. In this case, the risk relates to your longevity. — With an Index Linked Annuity, the risk relates to the future performance of that index, as well as longevity for the same reasons above. — With a with-profits annuity the risk relates not only to the markets, but also to the "provider risk" that the life company won't, or won't be able to, declare bonus. In Equitable's case, the "provider risk" was extreme, but hidden by the regulatory mal-administration, which took place. The pension provider has a statutory obligation to ensure that it has set aside and reserved funds in its balance sheets to meet future guaranteed obligations. But a with-profits annuity does not have to be covered in full by reserves, as a proportion (and, as demonstrated below, an increasing proportion) of the income is not guaranteed. This is the fundamental difference between the various types of conventional annuities and With-Profits Annuities. 4) THE ELAS WITH-PROFITS ANNUITIES The Equitable WPA was a very complex product, inadequately described in the product literature. The literature made the calculations of the annuity payment inaccessible to the annuitant. Essentially, the Total Annuity, that is the amount paid, is calculated as a function of the Anticipated Bonus Rate (ABR), chosen by the annuitant at the outset of the contract and the Overall Rate of Return (ORR) declared by the Equitable each year. In effect, in order to choose the ABR the annuitant was asked to guess the average rate of return likely to be achieved by the Equitable over the lifetime of the annuity, maybe 20 to 25 years in the future, this without any actuarial assistance that might have helped. As a result, in making this judgement as to ABR, the annuitant was heavily dependent on the advice of the salesman and the reputation of Equitable. The Ombudsman has found that Equitable's public image was distorted through the rating agencies due to the misleading picture from its returns. Equitable's management failed to inform its sales force as to its risk, and belittled such criticisms as there were from independent financial advisers, on the grounds that such adverse opinions were commission based. So the public had a misleading impression of the "provider risk" represented by Equitable. Consequently the choice of ABR, as well as the choice of a WPA in the first place, was informed by an inadequate appreciation of the risk. (In my case, I chose a rate of 7% being approximately half of the "average" growth in the stock market over the previous 15 to 20 years. It seemed a cautious number at the time and indeed in general Insurance and Pension funds have consistently exceeded that number. But I was unaware of the way the annuity really worked, and the true state of Equitable's finances.) The way it works Simply put, if in any one year the ORR was greater than the ABR, the pension, the Total Annuity, went up, or, conversely, if the ORR was less than the ABR, it went down. However, the Guaranteed Part of the annuity was calculated as a function of the ABR and the Declared Bonus Rate ("DBR"), which was selected each year by the Equitable. As with the Total Annuity, if the DBR was greater than the ABR, the guaranteed part of the annuity went up and if not then it went down. The difference between the Guaranteed Part of the annuity and the Total Annuity is called the Final Bonus Annuity. The Equitable Life literature describes the Final Bonus Annuity totally inadequately. There are various formulations. One of which is as follows, "A final (non-guaranteed) bonus may be added and that will bring the actual level of annuity payable for the year up to that determined by the overall rate of return, after allowing for the anticipated return." This is a critical statement since it suggests the following about the Final Bonus Annuity that it is: a) an insignificant part of the annuity; and b) "added" to the guaranteed part. The first statement is misleading to say the least and the second statement is simply not true. Chart 1 below, illustrates what was expected to happen to my Total Annuity payments, though at the time, February 1997, I did not understand the significance of the Final Bonus Annuity. This model assumes the basic starting conditions apply throughout the first 20 years of the lifetime of the annuity. Chart 1 As can be seen: a) The Total Annuity steadily increases. b) BUT the guaranteed part of the annuity payment steadily decreases. c) The Final Bonus Annuity, the part that is NOT guaranteed, steadily increases so that by year 15 (in my case 2012) it represents approx 50% of the annuity and by year 20, it represents approx 60% of the annuity! Bear in mind that it is this part of the annuity that we NOW know can be removed by the Equitable at any time it chooses. The first time that was fully understood by the annuitants was when Equitable actually removed the Final Bonus Annuity in November 2002. It begs the question, would any annuitant have bought such a risky product that truly understood this point? Chart 2 sets out what would have happened to my annuity and the potentially disastrous consequences to my income. (As it happens I have other annuities so the effect on me would have been less than it might have been but others that I know personally were entirely reliant on the annuity income from Equitable Life.) Chart 2 BUT shocking though these figures and statements are, they don't represent the real scandal, which arises out of the true state of Equitable's with-profits fund. A) The purchase price of a WPA goes into the global with profits fund. This was represented in the product literature as a sort of unit trust with gilts, property, equities and cash investment. Doubtless the actuaries calculated how much they needed to invest to cover the guaranteed part of the annuity, and bought gilts to match. But the guaranteed part declines every year. As to the rest of the income, it came from bonuses awarded on the with-profits fund. There were other calls on this. In particular the with-profits annuitants were in competition with investing policyholders for bonus, and with all the other insurance obligations of an insurer, management expenses, etc. In fact, although presented as investing in a diversified fund, the with-profits annuitant was investing in one company. We know, from Equitable's own proceedings against its old board and from the decision of the Disciplinary Tribunal of the Institute of Actuaries, as well as from The Ombudsman, Equitable was an incompetently managed company. Its with-profits fund was therefore the capital base of an incompetently run company. On this annuitants were supposed to rely for the rest of their lives, without any hope of being able to switch out once the incompetence became exposed. B) But we NOW know that a substantial part of the total annuity payment was not guaranteed, and had to be earned afresh each year. In the case of WPAs the Equitable ONLY needs to set aside and reserve for future "guaranteed" payments, or approximately half the income that they are expecting. The money that in the case of other annuities would have to be put aside in reserves can now be used for pay higher bonuses on other policies or for any other purpose designated by the board of directors of the Equitable. It therefore follows that over time the WPA either must decline in value in absolute terms, or be subsidised from new business or other policyholders' funds. This has the major components of a pyramid scheme. Without realising the With-Profits Annuitant had exchanged the certainty of a guaranteed income for the illusion of an annuity that in reality could not deliver a higher income but certainly exposed the annuitant to what is very high risk investment, quite unsuited to the requirement of establishing a future reliable pension income. And of course, ultimately that same money was used to meet the obligations of the Society to its investors at the expense of the future security of the With-Profits Annuitants. For other annuity types, Equitable was obliged to reserve for all future payments which as has been said would have been broadly the same over the full lifetime of the annuity. But Equitable did NOT do this for the With-Profits Annuity, save for the "guaranteed part", which released the income it was STILL expecting to be used for other purposes as stated above. This explains the phrase by the board of Equitable Life, that the With-Profits Annuity was "technically efficient" since it was able to use the "income" derived from the consideration money of the annuitants for purposes other than was their intention, understanding or consent. The WPA was deeply flawed for many reasons and arguably could never have delivered what it promised. Annuitants were being invited to "take a risk" in the market, which arguably policyholders might have understood, but were also exposed to the provider risk—the financial status of "the Society"—which clearly they could never have understood. It was a risk posed by an incompetently run life assurance company. That exposure increased as time went by, not just because the Equitable was becoming more and more precarious, but also because an ever increasing amount of the total annuity was "not guaranteed", and could be, and indeed was, removed. It is clear that it was the responsibility of the regulator to ensure that the products on the market were in fact capable of delivering what they were offering, since annuitants were reliant on the regulator to carry out the sort of tests that the above logic requires, and which lie quite beyond the competence of the general public. In summary, the Equitable WPA was quite unsuitable for the consumer trying to create a lifetime's income so as not to become dependent on the state—the whole objective of the "compulsory purchase" requirement. In light of Equitable's finances and approach, this product should never have been allowed or offered to the market place. 5) WITH PROFITS ANNUITANTS The people that ELTA represents are uniquely different from other policyholders. All are retired, with an average age in the mid 70's, some relative youngsters, active both physically and mentally, and others reaching the end of their lives with all the associated problems of memory and physical, and intellectual frailty that comes with the ageing process. Two illustrations tell the story. An annuitant phoned up to advise me of his new address. When asked what it was, there was silence and he said, sadly, "I have forgotten, I will go and check!" Another annuitant phoned me and said he was sorry for not doing more but he already had one leg amputated, was going into hospital for a tumour and in all probability would need his other leg amputated as well! These are the people who need our active support and assistance. We see the world differently from others. Within broad constraints, we know our income for the rest of our lives. It is fixed, or at best inflation linked. We have no future job prospects, no promotions in sight, no career moves, just the same income year in and year out. Accordingly, pensioners become very conservative about costs and budget very carefully to ensure that their expenses and incomes remain in balance. We live within our means, so if our income changes radically, as in the case of our Equitable WPAs, this poses some very real problems. And it makes no difference whether we have a large or small annuity: that money forms part of our plans for our lifestyle and once it is removed then we have lost out with no opportunity to recover the situation. We also come from a generation that reached political awareness at the end of the pre-war depression, survived the war, or grew up in the years of austerity following 1945. We learnt to survive, so whilst our incomes have been reduced and many have had to sell their properties in order to create funds to meet their liabilities, most of us just "tighten our belts", travel less and reduce our non-essential spending. Others rely on their families or the various income support schemes available to UK citizens from Social Services. This was NOT our objective when we spent our lives saving money so that we could live more comfortably without money worries during our retirement when at last we would have the time to simply spend more time with our families, or to explore new horizons, be they intellectual, travel or cultural. I have already made clear that we, the with-profits annuitants, are different from all other classes of policyholders because: 1. Our income is already significantly reduced and it looks as if such reductions will continue for the rest of the annuitants' lives. The transfer of the With-Profits Annuitants to The Prudential does NOT negate this statement. 2. With-profits annuitants (WPAs) believed they were buying an annuity that would increase at least broadly in line with inflation. This was the advice of the Equitable's tied representatives. Whilst we all understood there would be temporary variances from time to time as a function of the financial markets, it was never explained that nearly 50% of our annuity would NOT be guaranteed and could, and indeed has, been removed by the Equitable in order, we believe, to meet its obligations to other policyholders, who of course can take their investments elsewhere. I quote from an e-mail that I received recently. "Just to reinforce the point I met a friend recently who had his money invested with ELAS and he eventually withdrew it (£850K) less 16% and stuck the money into a risk free high interest account. After three years he has now recovered his capital and is a relieved and happy bunny." These policies were presented as being as secure as the so-called Blue Chip investments by a financial institution that had the highest reputation for probity in the UK and whose clients included many workers in state industries and service providers, civil servants and indeed MP's. 6) LOSS AND QUANTUM CALCULATIONS This is obviously a complex area and I am reliant on advice offered by Clarke Willmott and the actuaries that acted for the group of annuitants in the recent litigation. These numbers are not set in concrete, but whilst they may seem high, it is likely now that they could be higher. A) Loss Calculations Clearly there are Equitable Life policyholders who have suffered no financial loss during the relevant period. Conventional annuitants, who have been transferred to Canada Life, generally received competitive annuity rates and have not suffered cuts in their income as a result of the financial difficulties. Again, policyholders that invested and left the company before the policy cuts in July 2001 are normally unaffected. Other policyholders have generally sustained some financial loss. Ordinarily, in respect of most policyholders, their loss can be calculated by comparing their original investment, together with a notional investment return against the surrender value of their policy proceeds, plus interest from the surrender date. Accordingly, for instance, if an individual invested £100,000 in 1997, it could perhaps have been expected to realise a 4.5% compound return after tax. By 2002, it could therefore be expected to have reached a value of say £125,000. That policy may instead have had a value of £90,000 with a resulting loss of £35,000. The variables and assumptions are relatively finite and it is relatively straightforward to determine assumptions. Each individual had the option to crystallise any loss by surrendering or transferring the policy (or otherwise made a conscious decision to leave the policy with Equitable). The actual amounts invested and on surrender or transfer are clearly capable of being ascertained. The only issue is the alternative investment return, which would have been obtained. In respect of With-Profits Annuitants, the position is more complicated. As stated above, but for the mal-administration, there can be no question that these policyholders would not have purchased this product. This is a situation where Equitable's financial standing was absolutely key to their decision. Most individuals had reached the point where they had decided to retire and call upon their pension funds. As stated, it was compulsory for them to do so between the ages of 50 and 75. By far the most frequent decision in those circumstances is to purchase an annuity. Ordinarily people purchase level annuities. The advantage of such a purchase is that it maximises the starting income. The disadvantage is that it does not provide any safeguard against inflation. In order to provide some protection against inflation, the alternative conventional choices are either fixed escalating annuities, or RPI-linked annuities. The starting level of the annuity and their views in respect of inflation most frequently influenced individual decisions in the choice of annuity. My experience when a cross-section of Equitable annuitants were supplied with the starting levels of the alternatives and asked to consider the alternative product they would have purchased is that—57% would have chosen a level; 23% a 3% escalating annuity; 8% a 5% escalating annuity; and 12% an RPI-linked annuity. The importance of the choice is that it is a key variable in establishing the financial loss that has been suffered. It is only when the alternative transaction is known that a quantification of loss can be made. The income from the WPA to date should be capable of being ascertained. (See below regarding future income.) This must be compared to the income from the alternative transaction. The starting point is the starting level of that annuity. That will depend upon a number of factors—the annuitant's age at purchase; his spouse's age; any spousal benefits; the frequency of the annuity and whether its in arrears or in advance; any guarantee period; and of course, the purchase price. In addition, going forward, the likely income under the alternative annuity will depend upon whether the annuitant and/or his spouse is still alive, the spousal annuity, any guarantee period, the mortality assumptions based on the relevant current tables and the individuals' current ages and, of course, the nature of the alternative annuity (level, escalating, etc.). Against that amount must be offset the income received to date under the WPA and the anticipated income going forward. Again this will be dependent upon the same factors as above, but also crucially the exact current make-up of the constituent parts of the WPA, the assumed bonus rate of the annuity (and any guaranteed investment return) and assumptions in respect of future bonus rates. The constituent parts are the underlying annuity, declared bonus annuity and final bonus annuity referred to above—together with the notional annuity (which is a figure in the calculations, if there is no final bonus, and the current level of the annuity is dependent upon being maintained by the current underlying annuity and declared bonus annuity). The assumptions on future bonus rates are not only the overall rate of return, but also the declared bonus rate and interim bonus rate. The calculations are then dependent upon the exact anniversary in comparison to the date when bonuses are normally awarded. In reality, there will be no declared bonus going forward and the overall rate of return and interim rate of return figures can be assumed to be the same. The transfer to the Prudential is no saviour for the With-Profits Annuitants. Future overall rates of return were considered unlikely to exceed 5% per annum, despite the greater investment freedom following transfer to the Prudential and the limited provisions for support from the other Prudential funds on solvency. The reality however is likely to be far worse. WPAs have already been cut very severely below the levels of the alternative guaranteed annuities, which would have been chosen if the Equitable's financial standing had not been misrepresented. B) Quantum Calculations Based on the Equitable's 2006 press releases concerning the transfer of with-profits annuities to the Prudential, I believe that there were then about 62,000 policies transferred. There were about 400,000 policyholders in total so it follows that with-profits annuitants represented about 15% or less of the policyholder body. The press releases said they got assets representing 20% of the fund. From this it is possible to infer that with-profits policyholders: (i) On average had a bigger share of the fund than the investing policyholder, and (ii) That with-profits annuitants are a very small proportion of the policyholder body as a whole. I calculate that the total loss figure for the with-profits annuitants amounts to £6.287 billion (on a net basis) a figure reached by multiplying 62,000 by an annuitant's average loss figure as calculated by the claimants' actuary. (This calculation is based on the actuary's loss figures. I stress that the settlement terms are the subject of a confidentiality agreement reached at Equitable's request and acceded to by us so as to bring an early conclusion to the litigation.) Of course, this also depends on the litigants being representative of the general with-profits annuitant population. However, in light of the spread of dates and amounts, this seems to be reasonably likely. (It might be assumed that the actual settlement figure following the litigation and which is confidential can be derived from the data in the preceding paragraph. But as the above calculations contain factors that are NOT described, that is NOT possible.) Furthermore there is a strong argument that future bonus rates will need to be revisited in light of recent events in the financial markets. The loss figure was based on a future bonus rate of 4.5%; I am advised that currently Clarke Willmott and the actuary are considering a more likely outcome because of significant equity falls and the timing of the likely equity purchase following transfer to the Prudential to be 0% until 2014, and 4.5% thereafter. 7) FINANCIAL REDRESS There are many possible methods by which the With Profits Annuitants might be compensated. Most of these ideas were developed on the work done for the 400 claimants, but it must be recognised that dealing with 62,000 policies would be an enormous undertaking involving a great deal of cost and long delays before payment. For example, the actuary administering the settlement in the recent litigation required 4 man months work for 400 annuitants, which is the equivalent of 620 man months, or approx 51 man years of actuarial effort for a community of 62,000 with-profits annuitants. However, given the age profile of most with-profits annuitants, it is essential that speed is of the essence and if that means a simpler but less accurate settlement method, then that may be an over-riding criterion. There is no simple solution but possibilities include: a) The existing annuity is replaced with an annuity that reflects the original intent of the annuitant. Where a cumulative loss to date has been incurred a lump sum payment will be made and where there has been no loss to date, then the new annuity is reduced until the "over-payment" has been paid off. (The chance of any policies still being in credit is remote. They would certainly be exceptional.) This would return everyone to the status quo ante, but the problem arises in collecting data from all the policyholders, often not easily available. It has the attraction that there would not be a lump-sum payout, save for the balancing payment to date, as repayment would be made over time. b) Once the loss for the individual policyholder is calculated, a new annuity could be created that would compensate for that calculated loss over the lifetime of the annuitant. c) The policyholder receives a one off lump sum payment for the losses incurred to date and in the future. d) A simpler approach would be to set up parameters based on a "typical" WPA (say with assumptions on ages at purchase—say 60 for the annuitant and 58 for the spouse, spousal benefits—say two-thirds, guarantees—say five years, etc) and compare it to a similar alternative level annuity product—based on the fact that conventional level annuity purchase is by far the most frequent retirement strategy adopted. The actual variation is difficult to produce without very detailed calculation but the type of variation, which could be expected in such a comparison of net loss over time is as follows: Date of transaction Level of loss 1990 purchase 100% of initial purchase price 1992 purchase 85% of initial purchase price 1994 purchase 65% of initial purchase price 1996 purchase 50% of initial purchase price 1998 purchase 30% of initial purchase price 2000 purchase 20% of initial purchase price In addition, there are other significant issues such as taxation, how to deal with annuitants who have already received partial settlement of their claims, etc. CONCLUSION The 62,000 with-profits annuitants are individuals who during their working lives took care to put aside funds for their retirement. When they invested in the Equitable WPA, they believed they were creating a guaranteed income for life administered by a mutual society whose probity was unquestioned. Many are now old and frail, and are struggling to exist on an ever-diminishing income. Most have also suffered, and continue to suffer, considerable emotional distress as they watch their life savings quite literally dwindle away. We hope that the Public Administration Select Committee will understand from the foregoing presentation how this group has suffered serious financial loss as a result of inadequate regulation and the urgency with which that loss needs to be redressed. November 2008 © Parliamentary Copyright Keywords: Pension, Annuities, Annuity, Pensions Please note that the annuities and income drawdown information contained within the articles and general text on Annuities Central may not be intended for annuity consumer use, may no longer be current and should not be used by consumers to make financial decisions. It is very important that you don't use this annuity information in isolation to decide which annuity or annuity alternative to buy. Annuity comparisons and pensions information or opinions expressed are made as at the date of this publication and are subject to change without notice. Always seek the help of an annuity broker before you buy an annuity.

annuity comparisons Visit Open Annuities

You could increase your annuity by thousands. Make sure you recognise the best annuity advice when you get it. The more information about annuities you have, the more able you will be to recognise the best annuity advice when you receive it.
Visit Open Annuities Financial Services Register Number 530750


Annuity Plan Visit Pension Annuity Plan

You may be able to secure several thousand pounds more over your lifetime from annuity providers than your current pension provider. Many are unaware of this very important information. The more information you have, the more able you will be to recognise the best deal when you see it.
Visit Pension Annuity Plan Financial Services Register Number 530750


annuities plan Visit Annuities Plan

All fund sizes welcomed. Why should the annuity buyer be careful? Buying from your pension provider isn't always necessarily the best idea.
Visit Annuities Plan Financial Services Register Number 530750


annuity comparisons Visit Pension Annuity Planner

This company may be able to increase your standard pension annuity through enhanced annuities.
Visit Pension Annuity Planner Financial Services Register Number 530750


annuity comparisons Visit Annuity Base

Using specialist annuity industry search software, an FCA registered Independent Financial Adviser will query top annuity and annuity alternative providers' databases to help you compare and choose which one is the best for you.
Visit Annuity Base Financial Services Register Number 530750


annuity comparisons Visit The Enhanced Annuity

Specialists in enhanced annuities. It is estimated that up to 40% of the UK population could boost their pension annuity income with an "enhanced annuity".
Visit The Enhanced Annuity Financial Services Register Number 483817


annuity comparisons Visit Annuity Comparisons

Why would you use an automated annuity comparison website when an authorised, qualified pension consultant can advise you which is the best annuity for free with no obligation to buy? There are many reasons why you should not trust your future income to comparison tables on faceless sites. In some matters you need absolute certainty.
Visit Annuity Comparisons Financial Services Register Number 483817


annuity comparisons Visit Annuities Extra

Pension annuities for those of us who are not in the best of health. If you've a health problem, no matter how small or insignificant you think it is, you'll stand an increased chance of a higher annuity income.
Visit Annuities Extra Financial Services Register Number 483817


annuity comparisons Visit Simple Annuities

Finding an annuity does not have to be difficult. Pension annuity retirement finance experts with vast experience of annuities are waiting to help you. Compare pension annuities and annuity alternatives now.
Visit Simple Annuities Financial Services Register Number 483817


annuity comparisons Visit The Female Annuity

1000's of women retire every week in the UK. Compare annuities for women and their alternatives.
Visit The Female Annuity Financial Services Register Number 460094


annuity comparisons Visit Annuity Pathway

Your simple pension annuity journey. How you might take the wrong annuity route and lose the annuity income that is rightfully yours.
Visit Annuity Pathway Financial Services Register Number 460094


annuity comparisons Visit Just One Bite Annuities

How a pension annuity will affect your life. You will only get one bite of the annuity apple. Once you buy an annuity, there's no going back.
Visit Just One Bite Annuities Financial Services Register Number 460094


annuity comparisons Visit Pension Annuities Plus

Your annuity income may increase if you have had certain conditions such as high blood pressure, asthma or high cholesterol. This is also true for smokers and for those who have worked in certain occupations. Get pension annuity comparisons now.
Visit Pension Annuities Plus Financial Services Register Number 483817


annuity comparisons Visit Annuity Answers

Why should the pension annuity buyer beware and why do so many retirees ignore a much bigger annuity income? Compare annuities now.
Visit Annuity Answers Financial Services Register Number 483817


annuity comparisons Visit Smokers Annuities

Your lifespan as a smoker and your annuity options. We're sorry to be blunt, but you most likely already know that smokers, in general, have shorter lifespans than non-smokers. Of course annuity providers are well aware of this unfortunate fact of life. Increase your annuity now.
Visit Smokers Annuities Financial Services Register Number 483817


annuity comparisons Visit Annuity Key

Unlike some companies, all fund sizes are accepted. The Retirement Income Customer Hotline Limited may be able to boost your pension income by more than 40% compared with your current pension provider's offering.
Visit Annuity Key Financial Services Register Number 460094


annuity comparisons Visit Buy an Annuity

Buying an annuity from your pension provider isn't always necessarily the best option! You might be able to secure several thousand pounds more over your retirement from annuity providers than your current pension provider.
Visit Buy an Annuity Financial Services Register Number 154622


annuity office Visit Annuity Office

We recognise our annuity clients as individuals, which is why we deal with every case on a one-to-one individual basis. Did you know for instance that your income may increase if you have had certain health problems such as high blood pressure, high cholesterol or asthma? This is also true for smokers and for those who have worked in certain occupations.
Visit Annuity Office Financial Services Register Number 483817