8.1.14: Following Pensions Minister Steve Webb’s recent suggestion that pensioners should be given the power to switch annuities, wealth manager Brewin Dolphin has underlined the importance of shopping around and seeking professional advice when choosing your annuity.
Having spoken to four of the major pension providers, Brewin Dolphin has found considerable disparities between the best and worst annuities quoted for a typical 65 year old single male.
For example, the difference between the best and worst annuities available to a 65 year old single male with a £300k pension pot and a further 18.3 years to live is £3391 p.a. (£17,769 vs. £14,378), which equates to £62k in total.
The difference between the best and worst annuities available to the same male with a £500k pension pot is £5652 p.a. (£29,638 vs. £23,986), which equates to £103k in total.
Note that no special circumstances have been considered, which could make this difference considerably greater.
Nicholas Fitzgerald, Head of Financial Planning for Brewin Dolphin, commented:
"Steve Webb's idea should not be dismissed out of hand. We must all think hard about improving returns from pensions for an ageing population, and his innovative idea is full of good intentions. Deciding whether to buy an annuity is one of the biggest financial decisions most of us will ever make, and in the meantime it is essential to get professional advice and to shop around, since your annual income from your annuity could vary hugely depending on which provider you choose. The real tragedy in the example above is that you could be over £100k worse off just by accepting the first offer and not seeking advice, which of course is something we can all do something about…”.
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