According to the Association of British Insurers (3rd Quarter 2009) over 80 per cent of annuities were bought with funds of less than £40,000. This trend is predicted to continue.
Partnership, a specialist enhanced annuity provider, estimates that out of the 270,000 people who purchased annuities last year with funds under £40,000 only 70,000 shopped around. That means there were 200,000 people that may have obtained better annuity rates had they taken the time and effort to use their right to the open market option.
Partnership also belive that this group of people that just bought the pension from the pension company they saved with will collectively lose £450 million.
So why do 200,000 people not bother to take the open market option for what is probably the most important purchase during their lifetime? We asked Jennie Gray an independent financial adviser, Jennie said, “I think it is the fact that they do not undersatnd what it means to them, the information from the pension providers is complicated and some of the important detail about the open market option is deep into the literature. People tend to take the easy route and just sign for the rates offered by the pension company they saved with, without understanding the implication.”
To get the best annuity rates at retirement it is vital to shop around and use your right to the open market, remember you only get one chance.
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