Nationwide launches Annuity Challenge to boost shopping around

Building Society will make retirees better off – or they will receive £250

21 January 2014

Nationwide is challenging customers approaching retirement to shop around to secure the best annuity income - and if Nationwide's Annuity Service can't improve the customer's pension provider's offer, the customer will be given £250.

The aim of the Annuity Challenge is to prevent would-be retirees sleepwalking into choices in retirement that will leave them worse off over the long term. Many people approaching retirement are unaware that they can shop around with their pension pots – and that by doing so could achieve more income each and every year from an annuity, along with the potential for added benefits, such as spousal income and guaranteed payment periods.

Unfortunately many retirees simply accept the offer from their original pension schemes, known as ceding schemes, either out of a misplaced sense of loyalty, belief they have no choice or because they find the paperwork attached to their pension pots, the so-called ‘wake-up packs' (the documents that alert those approaching retirement to make a choice about annuities) impenetrable and confusing.

The Nationwide Annuity Challenge* states that Nationwide will increase the customer's income in retirement by bettering the quote from at least one of their pension providers, and the Society is confident that this will be possible in the vast majority of cases. If not, the customer will receive £250.

Guy Simmonds, Head of Product – Protection & Investments, Nationwide Building Society, said: "Customers approaching retirement are about to make a decision that will affect their income for the rest of their lives. Yet too many are not investigating options that might really improve their quality of life in retirement by sleepwalking into accepting the first offer of an annuity they receive.

"The Annuity Challenge is a bold offer to customers to wake them up to the fact that an annuity is a long term investment where they have one chance to make the right decision, and by shopping around they could find a better annuity deal. They may be bombarded by paperwork or find it easy to tick a box on a form to accept an offer from their existing pension company, but it can have long-lasting consequences not to shop around for the best annuity deals.

"We have already helped thousands of customers with advice offered through Nationwide's Annuity Service to find the best annuity deal from our panel of annuity providers, shape the pension that suits them and, through guiding customer through disclosure of health or lifestyle issues, secure an enhanced annuity offering a higher annual income.

"While our customers have on average enjoyed a 19%1 uplift on the annuity rate offered by their existing provider, by taking the time to understand the customer's health and lifestyle we've helped just under 60% of our customers to qualify for an enhanced annuity. A number of other customers have seen uplifts up to 100% or more.

"Taking time to prepare for retirement and seeking advice can help enable customers to secure the most appropriate annuity and achieve a financially secure retirement."

Since launching its annuity service, in March 2012, Nationwide annuity customers are on average 19%1 better off as a result of shopping around, representing a monetary value of an average extra annual income of £419.90. This equates to £7978.10 over 19 years, assuming an average life expectancy after the age of 652. The greatest uplift achieved for an individual customer of Nationwide's Annuity Service was 183%.

Nationwide has also secured almost 60% of all annuities on an enhanced rather than conventional basis3. The industry average indicates that approximately 20% of annuities are currently secured at an enhanced rate when customers shop around on the open market4.

Nationwide's Annuity Service is available to all customers approaching retirement with a total pension pot from £18,000. It offers access to a panel of leading providers, encourages customers to shop around for the best annuity option available and, where certain health conditions permit, directs customers towards potentially enhanced annuities for a higher monthly income.

Nationwide's Annuity Service is available on an advised or non-advised basis and outlines customers' financial options in retirement and supports them throughout the application process. For advice on annuities, there is a 3 per cent advice fee, which is payable from the remaining total pension fund after the tax-free lump sum has been taken.

It provides access through The Open Market Annuity Service to a panel of leading annuity providers, carefully chosen and regularly reviewed by Nationwide on the basis of their financial strength, customer service and competitive rates. There are currently six on the panel: Aviva, Canada Life, Just Retirement, Legal & General, LV=, and Partnership Life Assurance.

Notes to Editors

*The Annuity Challenge Criteria
A customer is eligible for the £250 if the Nationwide Annuities Service is unable to increase their retirement income offered by at least one of their pension provider(s) by a minimum of £0.01.

What customers will need to do:

1. Book an appointment with a Financial Planning Manager by 28 February 2014
2. Complete a full consultation through the Nationwide Annuity Service by 31 August 2014 (this will include attending more than one appointment)
3. If we can't increase a customer's retirement income from at least one of their pension pots then a claim form will be sent to the customer for them to claim £250 after their full consultation. This needs to be completed and returned in the envelope provided by 30 September 2014. We will then transfer the money to the customer's chosen bank account within thirty days of receiving the form.

Eligibility criteria:

To qualify for the offer customers must be eligible to use the Nationwide Annuity Service. This means they need to be:

  • Aged between 55 and 74
  • Have a permanent residential address in the UK or be a British National based overseas
  • Be looking to take a retirement income from a defined contribution pension scheme in the next six months
  • Have a combined defined contribution pension pot equal to or greater than £18,000
  • Any pension pot which has a guaranteed annuity rate or guaranteed minimum pension or is a final salary occupational scheme would be excluded from the Annuity Challenge offer

What Nationwide will do:

  • Use the personal options provided by the customer in their personalised Annuity Planning Guide to request like for like quotes from their pension provider(s)
  • Compare each pension pot against our Nationwide Annuity Service panel of providers to get the best rate
  • If needed we will refresh quotes to ensure they are valid against the information the pension providers have given us
  • Provided the quotes received from the customers pension provider and Nationwide's panel of annuity providers are within their validity periods, we will use these quotes as the basis of the comparison
  • If we can't increase a customer's retirement income from at least one of their pension pots by £0.01 then we'll give them £250
  • Only one payment of £250 per customer

Full terms and conditions apply.

1 Customers who purchased an annuity through Nationwide between November 2012 and October 2013 achieved a 19.21% average increase compared with a customer's own pension company annuity offer. Source: The Open Market Annuity Service, November 2013.

2 Source: Office for National Statistics (ONS) 2011. The average length of time a person aged 65 is expected to live is 19 years, 18 years for a man and 20 years for a woman.

3 Figures from Nationwide's Annuity Service show that from launch to January 2014, 58% of annuities have been offered on an enhanced basis.

4 Figures from Towers Watson February 2013, which show enhanced annuities are still only around 20% of total annuity policies sold.

Nationwide will advise and make a recommendation for customers after we have assessed their needs, but we only offer restricted advice on limited types of products from a limited number of companies. You may ask us for a list of the companies and products we offer advice on.

About Nationwide Building Society
Nationwide is the world's largest building society as well as one of the largest savings providers and a top-three provider of mortgages in the UK. It is also a major provider of current accounts, credit cards, ISAs and personal loans. Nationwide has around 15 million members.

Customers can manage their finances in branch, on the telephone, internet and post. The Society has around 15,000 employees. Nationwide's head office is in Swindon with administration centres based in Northampton, Bournemouth and Dunfermline. The Society also has a number of call centres across the UK.

Please note: If you are a customer looking for information on our products and services, please visit the main website.