Annuity transfer delays can cost pensioners £127 a week
Virgin Money backs increased pressure on delays
Delays in transferring pension savings into retirement income cost pensioners up to £127 a week despite the success of industry initiatives to speed up annuitisation, Virgin Money warns.
And the losses will be even higher if savers miss out on the best rates due to financial volatility – the income on a £100,000 fund* has dropped 7.2% in the past year which is equivalent to £520 a year.
In fact people retiring now are as much as £1,125 a year worse off than they would have been in November 2008 at the height of the financial crisis, Virgin Money analysis shows.
The ongoing campaign headed by the Association of British Insurers through the Origo Options service has cut average waiting times to transfer pension funds into an annuity to 11 calendar days from the previous average of 31 days.
That is a massive advance – but with a £100,000 fund yielding income of £6,651 for a 65-year-old man and £6,270 for a 65-year-old woman a delay of just a week could mean they miss out on £127 and £120 respectively.
The worst offenders on annuity transfers can take as long as 51 days – and a 10-week delay could cost £1,270 or £1,200.
A year ago the best rates for a 65-year-old man produced £7,171 while in November 2008 it was £7,776 a year, based on an £100,000 fund. For a woman the figures were £6,712 a year ago and £7,320 in November 2008.
Virgin Money’s Grant Bather said: “Buying an annuity is a once-in-a-lifetime decision which pensioners have to literally live with. The income is fixed for life and there are no second chances.
“When people are living longer in retirement the losses from delays really mount up. If you miss out on the best rates then the loss is compounded.
“The ABI’s Options programme has been a huge success which has delivered great benefits but the industry as a whole should be doing everything possible to ensure savers get the best deal possible.”
Virgin Money has been shown by research to be among the better providers when it comes to transferring savers’ cash into annuities.
It urges all people approaching retirement to shop around to find the best annuity rates across the whole of the market, rather than simply choosing the annuity on offer from their pension provider.
Virgin Money pledges to send out maturity forms to its pension customers within five working days when they request an annuity transfer form and to send a cheque to the annuity provider within a day once the customer returns the forms.
Notes to editors
For further information
Grant Bather at the Virgin Money Press Office
Tel: 0207 111 1012
Kevan Reilly / Chris Jarvis / Toby Clark
Citigate Dewe Rogerson
Tel: 0207 638 9571
About Virgin Money:
- Virgin Money is Virgin’s financial services arm and was established in 1995 as a joint venture between the Virgin Group and Norwich Union.
- In 1997, Virgin Direct Personal Financial Services Limited launched The Virgin One Account, a joint venture with The Royal Bank of Scotland that offered the UK’s first current account mortgage direct to the retail market. In 2001, RBS bought out the Virgin Group’s stake in the joint venture.
- In April 2004 the Virgin Group took 100% ownership of Virgin Money.
- Virgin Money currently has over 2.5 million customers and offers Payment Cards (Credit Cards & Prepaid Cards), Savings and Investment products (Stakeholder Pensions, Children’s Pensions, Employers Pensions, FTSE Tracker ISA, Bond & Gilt ISA, Climate Change ISA, Cash ISA, and Unit Trusts), General Insurance products (Motor, Home, Travel, and Pet) and Life Assurance products to the UK market.
- Virgin Money’s brand ambition is to make “everyone better off” – this philosophy underpins our approach to business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a profit to shareholders.
- Virgin has signed a five-year deal to be the official sponsor of the London Marathon, the biggest annual fundraising event in the world. The inaugural Virgin London Marathon was on 25 April 2010. The 2011 Virgin London Marathon is to be held on 17 April 2011. Virgin Money, the financial services division of the Virgin Group is leading the London Marathon sponsorship with the ambition to help runners raise £¼ billion over 5 years and will use its infrastructure, online capability and financial expertise to deliver that through Virgin Money Giving.