A stark warning has been issued to those approaching retirement age – don't automatically accept the annuity offered by your pension provider, as doing so could mean you're left with a significantly lower retirement income than if you shopped around.
According to research from Partnership, 49% of retirees surveyed took the annuity offered with only 12% of those conducting research beforehand, with a worrying 37% automatically accepting the offer without a second thought.
Luckily those that have yet to retire take a slightly more pragmatic view – 31% said they'd probably stay with the company but 19% would do research first, with just 12% automatically accepting the offer from their pension fund.
Further analysis revealed the reasons why respondents have decided to (or would eventually choose to) stay put, with 41% saying it was because they "trusted their pension provider" while an additional 24% felt it was "the easiest thing to do".
But, this loyalty/apathy mindset can cost a lot of money. According to Partnership's figures, those that have a modest pension pot of £28,900 and choose an enhanced annuity could potentially lose out on £7,180 over the course of 20 years, with this amounting to 23% of their income.
Future retirees are therefore being urged to not automatically trust that their pension provider will offer the best value for money.
"Individuals approaching retirement should be under no illusions: sticking with your existing annuity provider for your annuity is seldom the best course of action. The fixed nature of an annuity contract means that once a decision is made there is no going back.
"As a result, individuals owe themselves a duty of care to explore the full range of retirement income options, starting by shopping around to see what better annuity rates could be available through the open market option."
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