Annuities: Why accepting the first offer could cost you thousands


iStock_000003051325_ExtraSmallNew research from Investment Sense shows our typical British reserve could be costing retirees thousands of pounds over the rest of their life.

The benefit of shopping around and finding out whether you qualify for an Enhanced Annuity when you retire has been well documented.

But if you want the very best Annuity income you or your adviser need to do more.

Our research shows Annuity providers are routinely quoting lower incomes, only to increase significantly, often by thousands of pounds each year, when our adviser haggles with the provider on behalf of our client.

Two recent example show just how much you could lose if you don’t haggle.

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*Based on figures from Office for National Statistics (ONS)

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It’s clear some Annuity providers are routinely quoting lower annual incomes, presumably in the hope the client or adviser will accept the first offer, leaving a much larger profit margin for the insurer.

As our figures show, the practice could be costing people thousands of pounds during their retirement.

The message is clear, haggle with Annuity providers to squeeze every last pound of income from them. As your Annuity can never be changed, you get one shot at this. If you or your adviser fails to get the best possible income there is no going back.

Whilst you are in the haggling mood, why not try and get your Annuity broker to reduce their commission or fees? We have seen examples of ‘non-advised’ Annuity brokers taking up to 3.5% commission, far too much in our opinion for the value they are deliver; try and get it reduced, after all, the lower it goes, the higher your income rises.

Top tips for getting the best Annuity rate

As well as haggling there are some other basic steps you should take to ensure you make the best of your pension pot

1. Consider all options Make sure an Annuity is right for you in the first place, would another option, such as Income Drawdown, be more appropriate?

2. Use an Independent Financial Adviser Sure, you will have to pay them a fee, but in our experience this is generally no more and often less, than the commission you will pay if you use a ‘non-advised’ Annuity broker.

An Independent Financial Adviser will be able to consider all options available to you, work hard to secure you the best Annuity rate, advise you on whether you qualify for an Enhanced Annuity and complete the often complicated paperwork on your behalf.

3. Shop around You don’t have to buy an Annuity from the same company you held your pension with, you can use any Annuity provider. You, or preferably your Independent Financial Adviser, should be working hard to make sure that they do everything to get you the best possible income, including confirm whether or not you qualify for an Enhanced Annuity

Do you need help planning for your retirement?

Our team of Independent Financial Advisers are experienced in developing retirement income strategies for clients the length and breadth of the UK.

We can help you get a better Annuity income by working hard on your behalf and above all, haggling with Annuity providers, to squeeze ever last penny from them.

If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email