Pension providers in the UK will be expected to do more to encourage customers to shop around to get the best annuity rates when looking for an pension annuity.
The UK Government recently scrapped rules that mean retirees have to annuitise, but doing so will remain the best option for many.
By investing their pension pot in an annuity, pensioners guarantee themselves an annual income. However, the process of choosing a retirement annuity can often be complicated, while returns vary depending on the type of annuity that is taken.
For example, somebody with health problems or a smoker could drawdown a higher retirement income by taking advantage of enhanced annuity rates. To learn more about annuities please take a look at our tip: To annuitise or not to annuitise
A new best practice guide from the Association of British Insurers (ABI) that firms will be expected to follow, will mean pension providers must help increase customer understanding of retirement and assist them in purchasing the best annuity.
Customers will be sent all the information they need to make an informed decision four to six months before retirement, with no default annuity offer until six to ten weeks before retirement.
"With nearly half a million people expected to buy a pension annuity this year, it is hoped the guidance will have an impact on a great many consumers," Helen White, the ABI's acting director of life and savings, said.
The ABI is also in the process of producing a template shopping around form for customers, which will help them to compare annuities. This will also form part of the guidance.
If you're at the stage of life where you are considering using your pension pot to purchase an annuity, our annuity rates comparison best buy tables reveal the best annuity rates in the UK from various annuity providers in the market.
We've also recently partnered up with Premier Retirement Services to provide you with an online annuity calculator and annuity rates comparison service.
Choosing an annuity is likely to be one of the most important financial decisions you will ever make, so any time used researching the annuity market will most definitely be time well spent.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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