Under the rules that are in place now, pension companies are responsible for informing workers that an annuity choice is available so that a pension can be converted practically into an annual income. However, the process of doing so is often lengthy making it sometimes easier to choose an annuity that comes from the same company that holds your pension.
However, sticking with a pension provider is not always the best deal because due to the annuity differences offered by different sources, failing to shop around could mean losing a potential 60% of your retirement income.
Hargreaves Lansdown pension’s expert, Laith Khalaf, stated that pensioners could earn a few extra thousands of pounds if they would take the time to compare and shop around for an annuity because the difference between great and poor annuity rates can spread up to 20%. He added that often they hear clients say that the income that is arranged by the pension’s expert firm is about 60% more than they would have received otherwise.
Now however, new talk on the street is that the government will overhaul how one goes about purchasing into an annuity plan in a regulation known as the Open Market Option. The government has told the pensions industry they have a week to offer an explanation as to why consumers are not taking advantage of it.
Khalaf added that he believes it is due to the fact that the system does not properly educate people, but instead turns them towards automatically selecting an option and locking themselves into a lower income than what they could have got for the rest of their lives. He added that the Government is attempting to find a way to encourage people to shop around so that their best interests are spoken for.