16th November 2015
Pensioners who failed to look around and secure the best annuity rate since the onset of the new pension freedoms will collectively miss out on £104m in income over the course of retirement, claims new research.
Retirement Advantage looked at the number of people who bought an annuity since April this year, when the pension market shake-up went live.
It found that up to the end of September, 40,600 people purchased an annuity, of which 60% or 24,360, did not shop around for the best deal.
Using the average value of annuities purchased, at £53,300, the difference between the best standard annuity rate, at £3,038 a year, and the average standard rate, was £214 a year.
Over a typical retirement of 20 years, this will equate to £4,280 less income.
Andrew Tully, pensions technical director, Retirement Advantage, commented: “The true cost of pension freedom can be counted in the millions because people have not shopped around for their annuity.
“Despite measures being introduced in April to try and encourage better practice, the situation is getting worse, and the market is failing consumers.”
Tully added that the issue of poor value extends to drawdown.
“While drawdown is not a one-off purchase it is still important people look around the market for the right drawdown product, as you could easily find yourself caught out by high charging or complicated products. It will pay dividends to get professional financial advice to help find the right blend of products and the best value in the market,” he added.
“Unfortunately, the shopping around message appears to have been lost in the general noise around pension freedoms. We need firm and decisive action from the regulator to ensure the market works in the best interests of consumers.”