Retirees missing out on bigger annuities

More needs to be done to support customers purchasing an annuity and provide them with the information they need to choose the right product to suit their lifestyle, according to a new study.

A survey by Age UK Enterprises, the commercial arm of Age UK, found that 31% of people who have bought an annuity and retired claim they were not made aware by their pension provider that they could have shopped around.

Previous studies have shown that failing to look around for a better deal can wipe 30% off someone's annual pension income. For instance, certain medical conditions or lifestyle factors such as smoking could improve a person's annuity rate, yet 38% of respondents were not aware of this.

Upon retiring, workers use their pension pot to buy an annuity, something which then sets the size of their pension for life. People can only do this once, and Gordon Morris, managing director of Age UK Enterprises, wants to see the industry do more to support customers.

'Shopping around for the right type of annuity and the best rates is one way to enhance your income in later life,' he said.

'No one should simply accept the annuity offered by their pension provider; they should check first if other companies offer higher rates or a product that better suits their needs.'

Quantitative easing has hit annuity rates

The research, which was made up of 70% retired people and 30% non-retired aged over 60, also revealed that 29% feel uncertain or negative about their current financial situation, with 27% of these stating this is because of the financial crisis hitting their pension pots.

One in 10 people who felt negative about the state of their finances admitted their pension pots had turned out to be much smaller than they had expected.

It is now even more vital that people get the best deal as the yields on Government bonds, called gilts, to which annuity rates are linked, have also been dramatically reduced by recent rounds of quantitative easing.

Copyright Press Association 2012