Stealth Fees hit Pension Payouts (c/o Sunday Times)
The Sunday Times reported at the weekend that pensioners, already suffering from a crippling squeeze on retirement income, are being hit further by “hidden fees”.
Pensioners taking pensions directly, without taking advice are being penalised by the insurers pocketing the commission that would have gone to the adviser had advice been taken. Doubly hard is the fact that had advice been taken, they could have increased their income considerably.
Last year alone, 265,000 people bought an annuity straight from the insurer holding their pension savings (about two thirds). Most consumers are sent an annuity application from their providers in the run up to their retirement date. Thousands simply complete this form without considering whether it is offering good value. It is at this point that they should take advice from an independent financial adviser who will not only be able to do the shopping around for better rates, but may also be able to get an enhanced annuity depending on your medical condition.
The good news is that from the end of the year the rules change. Insurers will no longer be able to pay commission to advisers who will instead negotiate upfront fees with clients.
Hopefully this will encourage the insurers to be more open about their funding of the annuities and also provide the consumer with advice which is paid for up front and no more hidden fees should be happening.
The key advice here is not to just accept the pension providers annuity. It may cost you and leave you with a poorer pension.