Banned pensions ad shows Aviva doesn’t really know what it’s talking about

Aviva, one of the world’s largest financial services groups, has been caught with its integrity down by the Advertising Standards Authority.

The offending TV ad  – Aviva is one of our biggest television advertisers – is part of a series starring master-of-many-disguises Paul Whitehouse (the other half of the Harry Enfield comedic duo). On this occasion, he was masquerading as an OAP enjoying the fruits of his retirement in a recently renovated French country house:

Where’s the offence in that, you may ask? It lies in the apparently throwaway scripted line: “Aviva got me nigh on 20% more income from my pension pot.” And a more emphatic end-line to the same effect.

Not true, says the ASA. Despite exhaustive research into its own market place, Aviva simply could not provide substantiation for what it hoped was true: that it offers the best current annuity rates.

The ASA finding is interesting not so much because it exposes a degree of corporate dishonesty in Aviva (BCAP 5.1.1 and 5.1.2), but because it underlines what we have long suspected is the case. That is, the insurance-led pension annuity market is of such complexity and opacity that not even one of the principal operators within the sector really understands it. Ring a bell? Securitised sub-prime mortgages? Lehman Brothers?

Don’t just take my word for it. Here’s the ASA’s assessment, laid out in the mind-sapping and achingly dull analytical detail that is so characteristic of the pensions industry. It’s enough to send anyone but an actuary to sleep. And that, of course, is what the industry has relied upon over the years to lull us into a false sense of security.

But no longer. With so many baby-boomers – the key voting cohort – passing the pension line, annuities have become a hot issue. Most don’t like what they see – and for good reason. Annuity rates are vanishing before their eyes, thanks to the reducing effect of increased average longevity. And they’re equally unimpressed with a lack of industry transparency; and the way that insurance companies are permitted by law to pocket their pension pots once they die.

No wonder the Government is working so feverishly to change the system. Whatever else 2011 brings us, it looks like being the year of the drawdown-friendly SIPP.

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