11th December 2014
Retirees who do not shop around for the best annuity deals on the marketplace could be losing out tens of thousands of pounds in extra income new research claims.
On Thursday, the Financial Conduct Authority (FCA) published the results of its thematic review into annuity sales practices. It concluded that the market is not currently working effectively and retirees are continuing to suffer as a result of not shopping around.
My Pension Expert, has crunched some numbers to demonstrate how retirees not getting the best deals, when they swap their pension pots for an annuity.
The review highlighted enhanced annuities as a particular area of concern, as many consumers are missing out on significantly increased retirement incomes that they would be eligible for due to their health and lifestyle. My Pension Expert found that as around 60% of people qualify for enhanced annuities, which in leaves a significant number of retirees especially vulnerable.
Following the findings the hub, has carried out research to demonstrate just how much income retirees could be missing out on if they don’t shop around for the best rates. The study compared the various quotes of a 65-year old male with a pension pot of £100,000 who was looking to purchase a lifetime annuity.
The top quote available was £5,842 and the worst was £5,143, which works out at a 16% difference. When applied to the average length of retirement for a 65-year old male, at 23 years, this translates to £16,077 in lost income. A figure that would make a big difference to the standard of living the retiree would be able to achieve.
If however the male was a smoker that drank and also had high blood pressure then the disparity becomes even greater. The top available rate becomes £6,926, which is 26% more than the worst deal that he could potentially end up with should his circumstances not be factored in. Over an average retirement a staggering £41,009 of potential income would be lost as a result of not shopping around.
Scott Mullen director at My Pension Expert said: “It is essential that those looking to purchase an annuity shop around for the best rate and make sure that it factors in their individual medical and lifestyle conditions. It’s one of the most important financial decisions a person will make in their lifetime and a wrong move could end up costing thousands.
“We would always recommend seeking advice as thanks to the recent Budget there are now even more options open to retirees, which as a result have added further complications to the retirement process. An advisor can guide you through the procedure making sure that the right product is selected to suit your individual circumstances at the best rate available.”