Extra Retirement Income
200,000 each year miss out on extra retirement income worth £237m.
We think that’s a crime, and we urge everyone who is retiring to consult a financial adviser to see if extra retirement income can be extracted from pension funds and other investments. If you don’t have a financial adviser, feel free is contact us and we will happily introduce you to one who may well able to generate extra retirement income for you. But the earlier you do this, the greater the possibilities. But don’t forget your Home Protection Plan!
But here is the MGM article on the topic:
£237,000,000 is a conservative figure…it could be as high as £715m
MGM Advantage, the retirement income specialist, has revealed the true cost of baby boomers1 not shopping around for their annuity this year. Around 50%1 of people retiring each year do not shop around when it comes to choosing their annuity and collectively could be losing out on income worth more than £237m2 over a typical 22 year3 retirement.
Andrew Tully, pensions technical director, MGM Advantage said: “Having saved hard for retirement, it seems a cruel blow to lock into an annuity with your pension provider unaware you could have shopped around the market to get the best rate. Our research shows there is an entrenched lack of awareness of the ability to shop around for not only the best annuity rate but also the most appropriate product for individual needs.
“The lost income over a typical retirement can add up to thousands of pounds, although we think the numbers are actually on the conservative side. A significant number of people could qualify for a better annuity rate because of existing health or lifestyle conditions, and yet only 4%4 of people buy an enhanced annuity from the provider their pension savings are with. We have also only looked at the annuity rates from providers competing in the open market. Many providers choose not to publish the rates they offer internal customers.
“The size of the prize is quite staggering as the numbers only relate to the number of people retiring this year. As the baby boomer bubble retires, more and more people will be looking to turn their pension savings into a retirement income using an annuity.
“We welcome the ABI OMO Code of Conduct and other industry initiatives which will make a difference. However these numbers show there is significant progress still to be made. The value of seeking independent financial advice is highlighted by the additional income advisers can generate for clients.”
According to Retirement Nation 20125, 42% of the over 55s have not heard of the open market option.
1. Source: ABI. 400,000 people a year purchase an annuity, 50% of whom do not shop around.
2. Source: Analysis by MGM Advantage of Money Advice Service annuity data, based on an average £40,000 pension pot at retirement before tax-free cash. Loss of income is based on the difference between the average annuity rate and best annuity rate (as at 7.3.13), grossed up for the number of people retiring in 2013 and unlikely to shop around for their annuity.
3. Source: average life expectancy from GAD.
4. Source: analysis of ABI market data for 2012.
5. Source: MGM Advantage Retirement Nation 2012. The research was conducted by Research Plus+ who polled 2,003 people over the age of 55. Fieldwork was conducted during 13-19 July 2012.
6. Table shows the difference in income for someone aged 65 retiring with an average £40,000 pension pot (£30,000 net purchase price after 25% tax-free cash taken). Nil guarantee, level income in arrears, no spouse benefit. Rates from Money Advice Service (7.3.13) and MGM Advantage (7.3.13).
|Annual income at best standard rate||Annual income at worst standard rate||Annual income at average rate||Annual income on enhanced rates (mild impairment)||Total difference in income over 22 year retirement|
|£1,668||£1,513||£1,614||£1,823||£1,188 (av. conventional rate and best conventional rate)£3,410 (worst conventional rate and best conventional rate)
£4,598 (av. conventional rate and MGM Advantage enhanced rate for those who might qualify for enhanced rate)