ABI urges Britons to shop around for the best annuity
Tuesday, 27 September 2011 10:41
Shopping around for the best annuity is an essential way to get the most out of retirement, Britons have been warned.
Figures from the Association of British Insurers (ABI) revealed about a third of people approaching the end of their working life do not shop around for their annuity.
This means they can miss out on a higher retirement income and lose thousands of pounds as a result.
The ABI went on to show that the number of people buying an annuity from a firm other than their pension provider is increasing, it continued, but this trend is not happening quickly enough.
Around 650,000 people turn 65 in the UK every year, making it "critical" that the industry supports those individuals to obtain the best possible income in retirement, it said.
In addition, the need to look around for the best deal was amplified last week, with the news that stock markets slides over the past few months have had a catastrophic effect on the pension income that buying an annuity can bring.
Research conducted by investors Hargreaves Lansdowne showed pensioners with a £100,000 pot will receive 14 per cent less from their annuity than they would have done had they bought one at the start of the year.
To encourage individuals to shop around, the ABI is launching a compulsory code of practice for pension firms.
Under the new code, providers will remove the annuity application from the communications sent to customers, which should stop people automatically rolling over their pension savings to an annuity with their current provider.
Maggie Craig, director of life and savings said: "The ABI believes all consumers should shop around to maximise the income from their pension savings. However, not enough people shop around currently. This new industry initiative has been developed to make a significant difference to people's retirement outcomes."
Some commentators are sceptical about the proposals, however, with the head of pensions research at Hargreaves Lansdown Tom McPhail describing them as "a fudge".
"Insurers will still be able to include a quote for their own annuity, which may be significantly less than the best rate available on the market," he explained.
Use the Myfinances.co.uk comparison tables to find the best deal on a pension or annuity
Comments
Newsletter sign up