Are you coming up to retirement? If so, thinking about how you'll secure an income for your golden years should be at the top of your agenda. It isn't a decision that should be taken lightly, as the right choices can ensure you achieve the standard of living you want. If you still need convincing, learn from the regrets of those that failed to shop around…
Research from Just Retirement has highlighted the number of pension savers who wish they'd shopped around before committing to an income arrangement. Almost three-quarters of those who accepted the guaranteed pension income offered by their provider without considering other options or providers would "do things differently" if they were in the same position again: 71% would seek professional help, 43% would shop around themselves and 14% would leave the pension invested.
The study also found that pension providers themselves could take a lot of the blame, with many using "their privileged position to keep customers rather than encouraging them to shop around for better income solutions". In fact, three in 10 of those surveyed didn't even know they had choices at retirement, while the remaining 70% accepted the offer mainly because they trusted their provider to offer competitive rates.
Meanwhile, six in 10 said they found their provider's information "quite useful", but in many cases admitted that they got little more than confirmation of how much tax-free cash they could take and what income they would receive from the provider. This only serves to highlight the need to improve communication and guidance at retirement – something that the Government's guidance guarantee should hopefully address.
Stephen Lowe, of Just Retirement, commented on the findings: "At the point of making their decisions, three in 10 were under the impression they were compelled to buy from their existing provider, which is far too many," he said.
"Just as worrying are the reasons given for the inertia shown by those who said they did know they could shop around but chose not to. Four in 10 said they trusted their existing pension provider, three in 10 said it was the simplest or easiest option, two in 10 thought the pot was too small to be worth spending time on maximising, while one in 10 said they believed all providers tend to have similar rates.
"Clearly many of them now recognise they could have done better elsewhere. For example, eight out of 10 said there was no mention during the buying process of enhanced plans that could have delivered a higher income due to medical conditions and lifestyle factors."
The issues are even more important to address given the changes announced in the 2014 Budget. The annuities market is being transformed with no obligation to buy a guaranteed income at all, so it's important you understand all of the options so you can make an informed decision.
Getting advice is absolutely essential.
From next year the Government says everyone with a defined contribution pension will be offered free and impartial guidance on the options available to them.
In the meantime, if you're approaching retirement, you need to make sure you have got all the facts. Our guide, Making Sense of the Budget 2014 Announcements, will make for a good start, with further information available through our online annuity planner.
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