Hundreds of thousands of people who retire could benefit from an average rise of 20% to their pension income if they use an annuity specialist to research the whole market for them rather than taking their current provider’s annuity.
The Association of British Insurers, the trade body for insurance companies, has developed a new code designed to ensure insurers provide clear information to help people get the best income possible from their pension pots.
The code requires insurers to redesign their information packs to highlight the importance of shopping around for an annuity.
When an insurer sells an annuity to one of its own pension customers, it must ask a series of questions to match the right type of policy to the customer’s needs. In particular, it must identify whether the customer could qualify for an enhanced annuity, and tell the customer where he or she could buy one if the insurer does not provide this product.
All insurers selling annuities will be required to publish their rates. Currently those who only sell to their own pension customers; including Scottish Widows and Friends Life; are not required to publish their rates in the open market. Opening up the rates to comparison will enable customers to gauge whether their existing pension company is offering them a good deal.
More than half of those approaching retirement do not shop around for the best rates for an annuity and may potentially lose tens of thousands of pounds over the course of their retirement. Research by one annuity provider, Just Retirement, indicates that up to 70% of people could be entitled to an enhanced annuity because of medical conditions or lifestyle choices, such as smoking, resulting in their income rising by as much as 50%.
Just Retirement research shows 12% of all people buying annuities qualify for an enhanced annuity. Of the 66% who buy an annuity from their existing pension provider, just 1% end up with an enhanced annuity.
The ABI has already compelled its members to remove their own annuity application forms from the retirement packs sent out to their pension customers to reduce the danger of them going for the easiest, but not necessarily best option.
However, those approaching retirement in the next year must still ensure they are fully informed. Although the code comes into force with immediate effect, insurers need only implement it by 1 March 2013.
If you are worried that you might be missing out on a better deal in retirement and feel that you aren’t getting the full picture from your current insurer, get in touch today. Our team of friendly annuity advisors can point you in the right direction and could even get you more from your pension. Alternatively, fill in our quick and simple quote form on the right and we’ll compare annuities on your behalf. Annuity comparisons are FREE and you are under no obligation to make a purchase.