Retirement: Find out how pensioners lose £104 million in just six months


Find out how pensioners lose 104 million in just six months 150pxPension Freedom was introduced in April, but some seven months on new figures show that it hasn’t solved one of the key problems faced by people when they retire.

Despite many people, including well respected industry experts, predicting their demise, large numbers of people are still using an Annuity to turn their pension pot into an income. However, the failure of many people to shop around since the introduction of Pension Freedom, has already cost £104 million in lost future income.

According to research done by pension provider, Retirement Advantage, a staggering 60% of the 40,600 people who bought an Annuity failed to shop around for the best rate, leaving them worse off in retirement.

It seems that despite years of publicity the message to shop around, as well as considering other options, when the time comes to retire, just isn’t getting through.

6 tips to getting a better Annuity rate

If you are approaching retirement there are many things you can do to improve your Annuity rate. First things first though, you should check, preferably by taking independent financial advice, that an Annuity is the right option for you.

Once that has been decided, follow our six tips to get a better Annuity rate.

#1: Choose the right options

Getting the best possible Annuity rate is vital, but only after you have decided which options are right for you.

Considering whether you should include a pension for your spouse or civil partner, whether to include a guarantee period or to inflation proof your income, are all important decisions to take before you chase the best rate.

#2: Consider all Annuity providers

It’s important you get an Annuity quote from your existing pension provider, after all, they might offer the best deal and you may find you have a valuable Guaranteed Annuity Rate (GAR).

But, don’t accept their offer without checking out all other Annuity providers, as well as following our six tips.

According to Retirement Advantage over 20,000 people in the past six months, have failed to shop around, a mistake which could collectively cost them over £100 million.

#3: Do you qualify for an Enhanced Annuity?

An Enhanced Annuity is available to people who, due to illness or lifestyle, are expected to have a shortened life expectancy.

However, it isn’t just serious or critical illnesses which qualify. Many conditions, which people live with quite happily on a day to day basis, including high blood pressure, raised cholesterol and diabetes, generally qualify for an Enhanced Annuity.

Don’t make your decision until you have checked out whether or not you qualify.

#4: Visit your doctor

Annuities aren’t flexible, once you have bought one it can never be changed, which is why you should make every effort to qualify for an Enhanced Annuity, even if you think you are in prime health.

We’d always recommend booking a routine medical examination with your doctor before buying an Annuity. You may find you have a minor illness, which will mean you qualify for a higher income. If you plan to buy a joint Annuity with your spouse they should also book in for a check-up.

Checking after you have bought your Annuity is too late and could mean you have a lower income for the rest of your life.

#5: Don’t take the first offer

Once you have settled on the right options and narrowed down your choice to say two Annuity providers, now is the time to do something alien to most of us; haggle!

Whether you are taking the DIY route, or using an adviser, you should make sure that you have done everything you can to get the best possible income from the providers. You will be surprised at how much they want your business.

Remember too, if you are using a non-advised broking service they are paid commission and you can negotiate here too. If they reduce their cut, you will get a higher income.

#6: Cash is king

Even when they are very close to retirement most people still have a proportion, or in some cases their entire pension, invested in stocks and shares, which of course rise and fall in value.

If stock markets drop just before you retire this could reduce the size of your pension pot and therefore the amount of money you have to buy an Annuity, giving you a lower income in retirement.

In the months leading up to retirement, and certainly whilst you are shopping around for the best Annuity rate, you should consider switching your pension pot into a Cash based fund, sheltering it from falls in the stock markets, which are hard to predict and often take some time to reverse.

We’re here to help

If you are approaching retirement and would like advice on the best way to turn your pension pot into an income we are here to help.

Both Bev and Sarah are highly experienced advisers and experts in helping people plan for their retirement. Call them today on 0115 933 8433 or email