Rockingham throws down gauntlet to pension industry

In a move designed to help increasingly worse off pensioners, Rockingham Retirement has announced that it is scrapping its standard £195 administration fee to convert ALL pension funds of £20,000 and under to an annuity.

The initiative, which Rockingham Retirement believes will be widely emulated by annuity broker competitors and also independent financial advisers (IFAs) - which have hitherto enjoyed high commission charges from placing clients’ pension funds into annuity schemes – comes at a time when pension funds are shrinking due to the downturn in the global equities market and those in or approaching retirement are suffering from virtually zero returns on ordinary savings accounts.

“Pensioners are getting a really raw deal everywhere at the moment, and our scrapping of the smaller fund charges will help at what is an extremely difficult time. This has been achieved by employing economies of scale and radically streamlining processes,” said Rockingham Retirement’s MD, Steve Hunt.

“The latest Bank of England base rate cut to 1% is going to further decimate interest on pensioner savings and is inevitably going to have a negative impact on annuity rates.

“We can always be relied upon to search for the best annuity rates on the market, and we guarantee to find the best income possible – at no cost - regardless of the fund size.”

And for the majority – 60 plus per cent of those who do not exercise their open market option (OMO) - there will in addition be a typical 1% commission charge payable to other brokers, even if no advice is given.

“That means that life companies will be helping themselves to an extra £1,000 on a £100k pension fund – for doing absolutely nothing. It is an absurd situation which needs to be addressed urgently,” added Hunt.

“The annuities industry – and financial advisers – have not covered themselves in glory in recent years, due to the excessive commissions charged by some brokers and also by IFAs and the blatant reluctance to steer those coming up to retirement towards the best deals,” he said.

The majority of bigger life firms are also continuing to take “an absurdly long time” to transfer their pension clients to an appropriate annuity deal.

“Just six of the 16 annuity providers involved in the Association of British Insurers pension transfers initiative – which went live back in December – have signed up to the system, which is designed to speed up the unacceptable transfer delays,” said Hunt.

“In the last 12 months those approaching retirement have seen their funds reduce drastically - some by as much as 50%. And now that they are coming to take their pension income, annuity rates which determine that income are falling sharply.

“So for example, someone who was anticipating a pension income of £7,000 p.a. a year ago may be faced with a drastically reduced £4,000 per annum, or even less. There is more need than ever before to expedite the annuity process, and we shall continue campaigning for this throughout 2009.”

Ros Altmann, former Government adviser on pensions issues and a leading commentator on annuities, has applauded the Rockingham Retirement move to scrap charges on pension funds below £20k.

“Clearly, this initiative will be welcomed by thousands of pensioners who have been knocked for six by the dramatic fall in their income from ordinary savings accounts and need as much income as they can possibly get from their pension funds,” she said.