Good information is crucial – because making a poor choice when buying your pensions annuity can cost you thousands of pounds in lost pension income.
The difference between the best and worst performing annuities is significant, and is continuing to grow, according to the MGM Advantage Annuity Index published this month.
As an example, from April to June 2010, the difference between the best and worst enhanced annuities would have cut 16.78% off your pensions income.
MGM stated that, over the average retirement, men could stand to lose £10,129 in pension income, while women’s pensions income could have been down by £11,351, due to an underperforming annuity purchased with a £50,000 pension pot.
Even focusing on just the first 5 years of retirement, men buying a bottom quartile annuity (i.e. annuities in the bottom 25% by performance) could lose £2,152 in pensions income, and women £2,837.
The widening of the annuities gap between best and worst is also growing at a rapid rate. Both men and women would now (July 2010) receive over £600 less in pension income for the first five years of retirement, compared with what they would have got just 3 months ago. This timing issue makes it essential to take unbiased financial advice from an independent financial adviser, when buying an annuity.
On approaching retirement, consumers are often unaware of this crucial need to ask for unbiased financial advice on ‘shopping around’. Retirees often believe that they are obliged to purchase their pensions annuity from the company which handled their pension fund. This is untrue – in fact, they have what is known as the Open Market Option (OMO). This guarantees their right to use independent financial advice to locate the right pensions annuity, from all available on the market.
Would you like unbiased financial advice on buying an annuity? Ask us for pensions advice online or ring freephone 0800 678 5929 now.
