When you receive a quote for an annuity, it will be accompanied by an ‘Information Prompt’. This will contain some important information that you should consider before deciding to go ahead.
This is designed to help you see if you’re getting the best annuity income for your circumstances, or if you could get a better rate elsewhere within the market.
Why are they necessary?
The Financial Conduct Authority (FCA) have introduced Information Prompts as a way to ensure that prospective annuity customers are able to make a more informed choice by being aware of any better rates elsewhere.
They introduced these following research which suggested that although everyone has the opportunity to shop around, not enough people are. They hope that these prompts will encourage people to shop around whether they’re taking advice or not.
What do I need to know about the different types of Information Prompt?
When you request an annuity quote, you will receive one of the following three prompts:
- A prompt telling you another annuity provider can offer you a better income. This will show you the difference between the income you’ve been quoted and the best available income.
- A prompt telling you that the quote you’ve been given is the best available on the market based on the information you provided.
- A prompt with no comparison. Instead this will encourage you to shop around and suggest you might benefit from an enhanced annuity (this prompt is used when you haven’t provided your consent*).
*Advisers and annuity companies require your consent to use your information so they can provide you with a comparison. This could be asked for through your adviser, or the website you use.
What do I do with this information?
If your Information Prompt states that you could receive a better annuity income elsewhere, it will suggest that you speak to a financial adviser or use the research facilities on the Money Advice Service website to find out more.
Also, Information Prompts will include any ‘Protected Benefits’ that you might have on your pension that need to be taken into account. For example, if you have a Guaranteed Annuity Rate (GAR), that might offer a higher rate than is available in the market. These are important to consider before giving them up, as these benefits can be really valuable.
Health and lifestyle information
Information Prompts will compare on a like for like basis based on the data you provided. So to make sure that you get the best possible annuity income, it’s strongly recommended that you include all of your health and lifestyle information.
Most people don’t realise –you don’t have to be in poor health to benefit from an enhanced annuity. So it’s in your best interest to provide all of your health information.
You can do this by completing a ‘Retirement Health and Lifestyle Form’, which gathers your health information as well as your consent, and is widely used by advisers and annuity companies.