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Shop around

About a third of people with ‘defined contributions’ pensions buy their annuity from the same firm that manages their pensions fund.

But in the future, they will be forced to shop around for the best deal – good news, as it could provide four figure boosts to their retirement incomes.

Consumers may be missing out on a higher income, potentially losing thousands of pounds, over the course of their retirement,’ the Association of British Insurers said. The National Association of Pension Funds (NAPF) added that those who do not shop around for the best deal could end up receiving only 75 percent of the income that they would receive from the best deal on the market.

’Most consumers receive an application form for an annuity from their existing provider as part of the communication pack posted to them in the run-up to their retirement date,’ the ABI said. ‘Many simply complete and sign the application form and send it back to their existing provider, rather than shop around for a better deal.’

Gary Shaughnessy, the UK managing director of Fidelity Worldwide Investments, is in favour of ABI's proposals, saying: ‘With only 1pc annuities purchased from the incumbent insurer being enhanced annuities, we see huge potential for individuals to radically improve their retirement income by shopping around.’

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