Loyalty could reduce annuity income by over 20% - Annuities - News - Moneyfacts

News

Loyalty could reduce annuity income by over 20%

Loyalty could reduce annuity income by over 20%

Category: Annuities

Updated: 04/12/2013
First Published: 04/12/2013

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

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.

Richard Eagling, Head of Pensions at Moneyfacts, said:

"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."

What Next?

Increase your income in retirement by up to 40% by using our online annuity planner

Speak to a retirement specialist directly on 01737 233435

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.

Related Articles

Want an annuity? Your provider will help you pick

Buying an annuity can be fraught with difficulty, but what if you still want a guaranteed income? The regulator is stepping in, so it should soon be easier to find the annuity that meets your needs – because your provider is going to help.

Annuity rates rally after tough few months

Good news for those seeking a secure income in retirement: our latest analysis has revealed that annuity rates are staging a mini revival after suffering from heavy falls in recent months, so you’ll now be able to get slightly more from your savings.

Secondary annuity market scrapped

The Government is cancelling plans for a secondary annuity market, citing concerns about consumer protection. Given there were fears that many could be ripped off – and that it wouldn’t be right for most – the decision has been largely welcomed.
 
Close