Dominic Grinstead, managing director for MetLife struck a deal with Alico helping it achieve its goal to offer customers a fixed term annuity. Alico agreed to the proposed terms and conditions after six months of negotiations. It is hoped that MetLife will encourage people to use their services.

Mr Grinstead believes that a great opportunity has been created as he said: “We see a massive opportunity in the fixed term annuity market.”

People no longer believe that they need to apply for a one off annuity policy at 60 or 65. As humans live longer they can delay applying for annuities until they are in the seventies and eighties.

Living Time was linked with MetLife when it completed its take over deal. Before the link Living Time struggled as it cut staff to help its bottom line. Former Living Time director Dave Harris left the company believing that his position was redundant.

Innovation is essential to success and Grinstead suggests that the deal with Alico and Living Time was necessary to achieve change and improvement. Negotiators agreed that both parties can combine their strengths to create fixed term annuities. New ideas will only help to improve the services and efficiency of MetLife.

Advocates claim that fixed term annuities are better than other options as they provide certainty over a five, ten, fifteen and twenty year period for individuals and families. Fixed term annuities give customers the safety and stability they need to have a great life. MetLife can now give guarantee that you will have steady annual growth in your life time.

Government studies found that 875 000 people aged 65 years and over have either retired or are thinking about it. They showed that Britain’s population will continue to age as the baby boomer generation is expected to live to be 100.

“If you are one of these “baby boomers” you are approaching a period when you will have to make many decisions, particularly about pensions, which may need to support you for in excess of 35 years” The Department of Works Pensions spokesperson said.

Financial advisors are trained to provide you with the correct advice for you and your loved one. They can help you to decide if an annuity will provide you with what you need to have a great retirement. Choosing the right annuity is essential particularly as you need the money for longer.

The public need to be educated so that they can choose the right option for them. There is far more to annuities than how much you will receive and how you will receive it? Retirees need to know which company will give them the best deal.

Annuities are handy as they can supplement your part or full time income if still wish to work in retirement. Enhanced annuities pay more which is ideal if you have serious medical conditions or you smoke.

Long term annuities are essential for retired couples as they provide a safe, solid investment for everyone. Baby boomers need to plan for their retirement to ensure that they have an income when they stop working.

Women will be paid the same annuity rate as men if the European Court of Justice (ECJ) rules in their favour. Advocates argue that life expectancy is only one factor when considering annuity rates.

Life expectancy rates have increased for men and women in many western countries in the world. The current annuity rates do not allow for cultural, economic and social differences. Unforeseen events are not considered when annuity rates are fixed.

Improving women’s annuity rates provide stability as Dominic Grimstead of Metlife Europe said: “The decision to equalise rates at a higher level delivers certainty for clients and advisers and underlines the benefits of fixed-term annuities as a key product innovation.”

Even if the ECJ rules in favour of women there is no guarantee that insurance companies will comply with the ruling. Company managers will likely use their discretion to provide a fair service for men and women.

Critics suggest that life expectancy should be considered and that men will be disadvantaged if the ruling goes against them. Both advocates can only speculate on the outcome until the court’s ruling.

The outcome will determine whether women’s annuity rates change or not. Women will continue to argue for a fairer service until they get what they want.

Nobody knows how the annuity rates will be changed to achieve unisex ones. Some people suggest that men’s rates will decrease while women’s will increase. Europeans will have to wait for the ECJ judgment to implement changes to their annuity rate policy.

According to Alexander Forbes annuity rates are on the rise.

Its figures are based on a male annuitant aged 60 with a £100,000 pension pot. Aviva had the best level rate in February, adding £20 to its annual rate of £6,170. Canada Life came second with £6,038, whilst Saga, despite raising its rate by £80 to £5,960, came third.

“It is good to see annuity rates continuing to rise, even by a small amount,” says Gemma Goodman, head of operations at Alexander Forbes.

Matt Renier, IFA at Retirement Solutions, said, “Any rise in annuity rates is good news for consumers and it is nice to see these rises no matter how small given that all we have heard about for months and months is annuity rates reducing. Personally I wish more consumers would shop around and use the open market to take advantage of these rate increases on the open market option”, he added further, “More retirees should also look at the guaranteed annuity alternatives such as fixed term annuities and asset-backed annuities, if explained properly by IFAs and the retiree they can be great value for those that need more flexibility”.

Annuity rates could be reduced by European Court of Justice ruling

What is happening and why?
This principle of equality between men and women can be traced back to the French revolution at the end of the 18th century, according to Robert Morfee an experienced litigation solicitor specialising in pensions. Equality has underpinned EU legal principles from the outset and was most recently expressed in Directive 2004/113 which directs member states to ensure that there “shall be no direct discrimination based on sex including less favourable treatment for women for reasons of pregnancy and maternity”.

However there was an exception inserted into this directive at the very last minute allowed proportionate differences in insurance premiums and benefits if based on accurate actuarial and statistical data. The UK took advantage of this exception and continued to take into consideration the different life expectancies of men and women.

The Treaty of Lisbon which came into force on 1st December introduced the Charter for Fundamental Rights which included a principle of non-discrimination “on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation”.

Then a few years ago a Belgian consumer group took legal proceedings to outlaw what it saw as gender discrimination in the pricing of insurance policies and the matter was referred to European Court of Justice.

In September 2010 Dr Juliane Kokott, an advocate general in the European Court of Justice (ECJ) delivered a powerful opinion in which she expressed an opinion that sex discrimination in underwriting insurance policies is incompatible with the Charter of Fundamental Rights and therefore illegal under EU law. If this opinion is accepted by European Court of Justice one of the effects of this is will be to equalise annuity rates for men and women.

The European Court of Justice is not bound by the opinion of the Advocate General. Although the court appears to agree in the majority of cases, this is not always the case. So we currently await the court’s ruling, which may come as early as March 2011.

What effect will this have on annuity rates?
For over 200 years the UK insurance industry has calculated the price of annuities with reference to different life expectancy tables for both and men and women but this may be about to end and actuaries will not be able to allow for the fact that on average women live longer than men.

Whilst this may seem to benefit women the reality is that most people buying annuities in the future may end up worse off for the following reasons:

The annuity income for men will reduce as rates will be equalised towards the rates for women Joint life annuities will also reduce so women who are beneficiaries of joint life annuities will end up with lower income. It is estimated that cost of introducing gender equal annuities will reduce income by about 5%

Source: The Retirement Partnership

In recent years governments have become aware of an impending pensions crisis. There will be a major demographic change in the population of many countries, with more older people, and less younger, working taxpayers. Many countries will find it difficult to fund health care, social care, and adequate levels of state pension, and it therefore becomes desirable that people of working age save and invest as much towards their retirement as they can afford. Saving is most effective when started at an early age. The savings are invested with the intention of building up an adequate fund by the time the person reaches retirement age. A pension annuity is then purchased providing a guaranteed retirement income for the rest of the pensioner’s life.

With existing and anticipated demographic changes most governments in the developed world wish to encourage workers to save money to ensure that they have adequate income in retirement, and are not forced into poverty or reliance on state benefits. Savings in schemes such as stakeholder pensions benefit from tax advantages, and those who are in employment are advised to start saving towards their retirement at an early age.

Money saved in pension funds is usually invested in markets which bring the highest returns over an extended period of time. Historical evidence shows that the stock market outperforms most other kinds of investment over a period of more than five years, although in any individual year the stock market may go down.

It is therefore considered advisable that a worker’s pension fund should be initially invested in markets which offer the opportunity for high growth. When a person start saving at an early point in their life, the money invested in their fund has the maximum opportunity to grow in value, and the maximum time available to recover from any downturns in the stock market.

As the person approaches retirement age, the company responsible for managing their retirement fund will normally make changes, moving the money to lower performing, but less risky investments. This is intended to protect the value which has already been accrued in the fund.

Pension saving schemes such as these, which are often referred to as money purchase pensions, are converted to cash at the time of a person’s retirement. The money realized from the investment is then used to buy an annuity.

Annuities are purchased from life assurance companies, and offer a guaranteed lifetime income, in exchange for the money saved in the pension fund. There are number of different options when buying an annuity. For example a spouse’s pension may be included, and there may be enhanced annuity rates for persons who have a health condition, or are a regular smoker.

There is an open market for annuities, and people approaching retirement are not obliged to buy the annuity offered by the company who managed their retirement savings. There are various online pension annuity comparison websites allowing rates to be compared from different providers. Alternatively those approaching retirement could employ an Independent Financial Adviser, who can search the market for the most appropriate product.

There are a number of ways in which people can save towards their retirement. These include private pension schemes and occupational pension schemes, which usually offer certain tax advantages, and other forms of saving such as deposits in banks, or investments in the stock market, or in property. Most pension saving schemes do not offer a guaranteed income in retirement. Instead the money saved in the pension fund will grow until the time of a person’s retirement, at which time they may choose to purchase an annuity. Annuities are a kind of insurance, offering a guaranteed lifetime income, in exchange for the pension fund savings.

People can save towards their retirement using various financial vehicles. Often the best way to save is to choose a scheme which offers tax advantages. These schemes are available in most countries. For example in the United States, Individual Retirement Accounts are available in two versions, one of which offers a tax advantage when money is paid into the account, while the other offers a tax advantage when funds are disbursed from the account.

Similar schemes in the United Kingdom are called Personal Pension Plans, and stakeholder pensions. There are usually limits on how much an individual is allowed to save in any particular year, and sometimes over their entire lifetime. Individuals may therefore also choose other forms of investment, such as direct investment in stocks and shares, unit trusts, savings deposits accounts, and investment in property.

Most pension saving schemes do not offer a guaranteed income in retirement, but investments are made in the hope that a suitably big pension pot will have built up by the time the person retires. This will depend both on the amount of money saved in the fund, and the growth of the investments. This form of pension is sometimes called “money purchase” signifying that the investments will be converted to cash at the time of retirement, and used to purchase a retirement income.

Purchasing an annuity is one of the more common ways to convert the savings in the pension pot into a retirement income. Annuities offer a guaranteed retirement income, in other words they will continue to be paid no matter how long a person lives after retirement. Annuities can be purchased at a flat rate, or they can be inflation proofed.

Usually there are some rules determining when the money can be withdrawn from the pension pot, and used to purchase an annuity. Typically an annuity cannot be purchased before the age of 55. It can be unwise to delay the purchase of an annuity for too many years, and if a person is making withdrawals (income draw-down) from their pension fund, it is recommended that regular financial reviews be carried out to avoid the danger of fund depletion.

Annuities can be bought either from the organization which managed the pension fund, or they may be bought from any life assurance company on the open market. There are a number of annuity comparison sites which make it easy to compare rates from different life companies.

Annuities with enhanced rates are available for regular smokers, and people with existing health conditions, which might put them at risk of having a shorter than average lifespan. If an enhanced annuity rate is offered, then life company will normally contact the person’s doctor for a medical report.

On the 9 December 2010 the Treasury announced the new pension reform rules around annuitisation bringing to an end the need to annuitise at age 75. Many retirees believe this could be the end of annuities as we have known them for so long.

The new rules announced by the Treasury introduce two new retirement schemes, not to replace annuities, but to complement them and give greater flexibility in retirement. Of the two new schemes ‘Capped Drawdown’ will replace the existing unsecured pension and avoid the need for retirees to enter into Alternatively Secured Pension or purchase an annuity. There will be new rules regarding the amount of income that can be withdrawn from the schemes.

Here at annuitysupermarket.com we asked independent financial adviser and annuity expert David Bell, from Annuities4u limited to comment on the new Treasury annuitisation rules, David said, “I personally think it is great news that the Treasury has removed the need to annuitise, this will give those pension savers that do not need an income an opportunity to remain invested in their pension and able to capitalise on the death benefits that provides. As a drawdown specialist I am also quite excited about the new ‘Capped Drawdown’ scheme and again the fact that at age 75 there is no need to annuitise”.

It still amazes us at Annuity Supermarket, that so many people still take the first annuity offer made to them by their pension provider. But when you really think about it, the fact of the matter is that the Open Market Option is not being sufficiently publicised. Yes, your pension provider is obliged to let you know you have the right to shop around on the open market with the pack they sent you before your retirement. But with so much to read and take on board, unless the Open Market Option is prominently displayed within the literature (which it often isn’t) you could easily miss is.

We think this contributes in part to so many people not shopping around. 65% in fact, do not take advantage of their right to shop around and thus miss out on potentially thousands of pounds.

There are a whole host of different annuity providers, types and options and these can all affect the rates you receive. So with so many options there’s no guarantee that your pension provider is offering you the best rates.

Add to that the fact that recent figures suggest that around 60% of retirees could qualify for enhanced annuity rates (eligibility criteria include weight problems, excessive drinking or smoking and literally thousands of health conditions) and there really is massive potential in shopping around to increase your retirement income substantially.

And the best part? You have absolutely nothing to lose!