There’s no doubt that Pension Freedom has helped many people retire early, as well as taking money from their pension in a way which suits them.
It isn’t all good news though.
New figures show that despite the increased flexibility, those people who buy an Annuity are still losing out on millions of pounds each year.
Research reveals losses
The research from Retirement Advantage, shows that in the two years since Pension Freedom started:
- 50% of people buy their Annuity from their current pension provider
- Not shopping around will cost pensioners £765 million over the duration of their retirement
Since April 2015, when Pension Freedom was introduced, 90,450 have bought an Annuity. But, with 50% of people failing to consider other Annuity providers, it’s clear the message that shopping around is crucial, is failing to get through.
To put the importance of shopping around into context, Retirement Advantage’s research shows that failing to do so will cost each pensioner an average of £8,460.
Commenting on the research, Andrew Tully, Pensions Technical Director at Retirement Advantage, said: “Unfortunately the Pension Freedoms have given people a licence to lose money, as half of those buying an Annuity fail to shop around and get the best deal. This situation has actually got worse since April 2015. Taking some simple steps at the start of the process can ensure you not only get the right annuity for your circumstances but can also make a big difference to the income you receive over the course of your retirement.”
Since Pension Freedoms were introduced fewer people have bought an Annuity, with more opting for Flexi-Access Drawdown. This method means the pension pot remains invested, with income simply taken as required. The income is not guaranteed, as it is with an Annuity, but it is often seen as being more flexible and allows more money to be passed on after death.
However, pensioners who choose this option equally benefit from shopping around.
Andrew Tully again: “We shouldn’t lose sight of the issue of poor value and the lack of shopping around also extends to the Drawdown market. While Drawdown is not a one-off purchase like an Annuity, it is still important people look around for the right product, as you can easily find yourself caught out by high charges.”
“Seeking the right professional financial advice will ensure you not only buy the right product but get the best value for your personal circumstances.”
Here to help
If you are retiring soon and considering your options, Bev and Sarah are here to provide Independent Financial Advice in Nottingham and beyond.
We are here to help, feel free to call us on 0115 933 8433 for an initial chat.