Retirement
People nearing retirement risk missing out on extra income
Millions of people could be losing out on additional retirement income by sticking with their existing pension provider, a new report has found.
Research by retirement specialists Partnership revealed that 76% of those approaching retirement believed that staying with their existing pension provider would ‘make no difference’ to the amount of money they received from their annuity.
Only 13% realised that by taking an annuity with their existing pension provider, they risked reducing the amount of income they get from their annuity.
According to a report by the Pensions Policy Institute, as many as half of savers who purchased an annuity in 2012 – as many as 450,000 people – did not “shop around” for the best deal, and therefore lost out on additional income.
Meanwhile, Partnership found that only 17% of people understood that if they smoked or were overweight they could potentially get more money in retirement.
Few people also realised that if they were in ill health or had a medical condition, they could get more from their pension pot or that due to post code pricing, living in a nice area may mean a lower income from their annuity.
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Previous research from the insurer found people living in expensive areas could lose nearly a fifth of their retirement income for life by not declaring their medical conditions.
Andrew Megson of retirement at Partnership said: “For most people, choosing an annuity is one of the biggest financial decisions of their lives as they will be setting their income for their retirement. Therefore, it is extremely worrying to see that most people simply assume that staying with their existing pension provider will have no impact on the amount they receive.
“For people with medical or lifestyle conditions, the impact of not shopping around is likely to be even more devastating as an increase of 20% in excess of a standard annuity would be reasonably typical for one of our 65-year old customers and, for severe conditions, could be considerably more.”
The research also found that while married couples don’t have to take out a joint annuity if they choose to do so they are more likely to get a lower income, something only 12% of those surveyed realised.