Many people approaching retirement age are unaware of their right to ‘shop around’ for a pensions annuity, and take advantage of considerable savings that can be made on their retirement income.
Several months before retirement, most pensions savers receive an information pack from their pensions provider informing them of the regulations governing pension income. While they are correctly informed that they may take 25% of their pension savings right away as a tax-free lump sum, and that they have the right to defer purchasing an annuity until they are 75 if they wish, the arrival of this literature gives many the impression that they are required to buy their pensions annuity from their existing pension company.
This is not the case; in fact, pensioners are given the right to compare annuities freely, considering the whole market. We shop around when buying a car that will last us perhaps 10 years; how much more important to shop for your pensions annuity, which will be an ‘all of life’ decision, and largely dictate your quality of life in retirement!
Taking as an example figures for December 2009, a simple search for an annuity from a pension pot of £100,000 flagged up products providing vastly different monthly incomes. Simply by shopping around, annuities were available from Canada Life paying £5,628 per year, down to a Scottish Widows annuity paying £4,632 per year.
With one simple search, it was possible to find an annuity that added £996 per year to your retirement income!
Most important when shopping around for any financial services product is to use an independent financial adviser, whose whole of market approach ensures that all available products are considered, when searching for the right annuity for you.
