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Category: Pensions Date: 11/17/2009
Retirees have been told they need to start shopping around for their annuities, in the same way that they shop around in their everyday lives
According to MGM Advantage, the recession has resulted in Britons becoming increasingly canny when it comes to negotiating the cost of major purchases, but they could still be losing out on thousands of pounds by not shopping around as they approach retirement.
Almost half (49%) of Britons said they haggled and shopped around in search of bargains when buying big ticket items such as houses, cars and household furniture and furnishings.
However, just one in ten people surveyed said they would search around for the best price when they convert their pension into an annuity providing income throughout their retirement.
Last year, over 60% of people buying an annuity chose the one offered to them by their existing pension provider.
Meanwhile, fewer than one in five adults were aware of the open market option (OMO), which allows those nearing retirement to shop around for their pension annuity.
Yet a woman with a £50,000 pension pot, who lived for 20 years after retirement, could be around £11,000 better off by shopping around for a top quartile standard annuity compared to one in the bottom quartile.
The same individual could also be a further £4,000 better off if they found that they were entitled to an enhanced annuity and opted for the best deal.
"It's a real concern that we are all so comfortable haggling over the price of a car or new sofa but so reluctant to look around or to negotiate over the price of a pension annuity," said Aston Goodey, Director of Sales & Marketing at MGM Advantage.
"This is particularly worrying as you only have one chance in your life to shop around for the best possible annuity. Failing to do so could mean a difference of hundreds of pounds a month, and in some cases could even tip pensioners into poverty.
"We believe that many people close to retirement simply don't realise that they can shop around for the best annuity rate and increase their retirement income by such a significant amount of money."
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 Any products featured may be withdrawn by their provider or changed at anytime.