Is the Annuity Market too Complex?
Leading pensions experts say that a “hugely unfair annuity system” is costing unsuspecting private sector pensioners dearly.
A joint report by the National Association of Pension Funds (NAPF) and the Pensions Institute (PI) at Cass Business School found that around half a million people retiring each year are being short-changed when converting their pension pot into an annuity – an income for life.
It is argued that the process of selection of an annuity is too complex and as a result most go for the “easy option” and stay with their pension scheme provider. This decision is short sighted and potentially costly. It is claimed that this failure to shop around for a better deal wipes an average of 30 per cent off their annual pension income, or up to 50 per cent for some.
Shopping around for an annuity supplier is obviously a wise decision, as is taking advice from a professional Financial Adviser who would help you select the correct option for you which will take into consideration such factors as health and marital status.
Annuities are complex and the decision making process is obviously impacted by this which is why many people are taking the easy option of staying with their pension provider, but, as is indicated by the report above, this could be a costly decision. If you feel you cannot make the decision yourself, take advice. The cost of the advice is likely to be considerably less than losing out on your future income!