Two thirds get 'bad' annuity deal

Two thirds get 'bad' annuity deal

Up to two thirds of Britons going into retirement could get a better income from their pension pot if they shopped around for the best annuity, provider Just Group has claimed.

Stephen Lowe, communications director at Just, claimed more than two thirds of retirees could get higher incomes if further information, such as health history and lifestyle, was considered before opting for a plan.

People with health issues can qualify for an enhanced annuity which offers better rates than a standard plan.

Mr Lowe said while some providers already probe customers about their lifestyle factors, there was a lack of consistency between approaches.

The warning comes a month before the Financial Conduct Authority's consultation on driving better retirement outcomes closes on 5 April 2019. The consultation is part of its ongoing review into the at retirement sector. 

The regulator already introduced rules last March for providers to use quote comparison templates when approached by a client.

This was after it found clients were not shopping around which meant they were missing out on the best available deals.

Just Group praised further FCA plans to force firms to ask more questions of people seeking to buy an annuity from November, but said those entering retirement before then could still be losing out financially.

Mr Lowe said: "Rules put in place a year ago were designed to encourage shopping around by forcing financial firms to show consumers their own guaranteed income for life rates side by side with the best on the market.

"While this was a welcome move, there was still a serious weakness because there was no compulsion for firms to find out about that consumer’s health history or lifestyle factors, which is essential to optimise the income available.

"It is hit and miss whether people today are getting the information they need to make what is often a huge financial decision."

Former pensions minister Steve Webb, who now works as director of policy for Royal London, agreed it was relatively common for people to miss out on an uplift to their annuity because of a health or lifestyle issue.

He said: "It is vital that action is taken to make sure that those who probably have the greatest need of an enhanced income are alerted to this possibility.

"People may not realise that they could get more money if they disclose a health problem and may have been in the habit of not reporting such problems on official forms.

"This is one time when being open and comprehensive about health issues can be an advantage, and those buying annuities should be actively encouraged to do so."