Pensioners lose out on extra income
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.The vast majority of pensioners are continuing to fail to shop around for the best rate when they buy an annuity, potentially depriving themselves of thousands of pounds of extra income for the rest of their lives.
The vast majority of pensioners are continuing to fail to shop around for the best rate when they buy an annuity, potentially depriving themselves of thousands of pounds of extra income for the rest of their lives.
According to figures from the Association of British Insurers (ABI), just 30.9 per cent of pensioners bought an annuity from someone other than their pension provider during the third quarter of last year, in spite of the fact that the majority would have been able to get a better rate elsewhere.
The continued apathy in the annuity market is bad news for the Financial Services Authority (FSA), which has implemented a number of policy initiatives during the past few years in a bid to persuade more consumers to shop around, or exercise the so-called "open market option".
In September 2002, the FSA introduced rules compelling pension providers to inform people of their right to shop around, by sending them a "wake-up" letter in the last few months before they retire.
But since the new measures came into force, the number of people shopping around appears to have fallen. Two years ago, about 38 per cent of pensioners bought an annuity from someone other than their pension provider. That has fallen by some seven percentage points.
Tom McPhail, the head of pensions research for Hargreaves Lansdown, the Bristol-based financial advisers, says most people are unaware they could get up to 25 per cent more income from their pension by shopping around for an annuity.
He believes the ABI and FSA need to go further to help consumers understand. "The way information is presented to investors needs to change," he says. "The letter from the provider tells you about how much you will get from various annuities with them, and then has one line at the bottom about your right to shop around. That's the wrong way round."
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments