One in four (25%) Brits saving into a private pension, and approaching retirement, believe – incorrectly – that they have to take out an annuity with their current pension provider, according to research by independent pension advice website, Increase Your Pension.
By not shopping around — or exercising the ‘open market option’ — a significant percentage of Brits are missing out on thousands, or even tens of thousands of pounds of extra retirement income per year.
More than four in ten (42%) people also believe that when they die, their pensions will automatically be transferred to their spouse or next of kin. However, for those that haven’t ticked the right boxes when choosing their annuity – the money can be lost to the provider forever.
Craig Palfrey, founder of Increase Your Pension, comments:
“When you think that choosing an annuity is a decision that is generally irreversible and one you will live with for the rest of your life, there needs to be much more awareness about the ability to shop around. Most people have one shot at an annuity and at the moment many are still getting it wrong.
While pension providers are obliged to send customers information four to six months before their retirement date, highlighting that they are free to switch to another pension provider if they find a better rate, for many people the message is clearly not getting through.
Too many people still believe their annuity has to come through the same provider they’ve saved their pension fund with, and so will not be shopping around for better annuities - or for other options that may be better suited, such as fixed term annuities.”
Retirement fears
Increase Your Pension also asked respondents how they felt about retirement. Almost half (47%) are nervous about how they will cope financially during retirement, and as a result were not looking forward to retiring.
One in five (20%), meanwhile, of those approaching retirement admitted they are facing a tough, or tougher than expected, retirement for financial reasons, but that it was largely their own fault because they hadn’t put enough savings aside.
Just over one in five (21%) confessed they should have saved more but did feel that successive governments haven’t done enough to raise awareness about the importance of saving for retirement.
When asked what age they expected to retire, a third (33%) said they believed they would still be working between 66 and 70 years old, with one in 10 admitting they still expected to be working into their 70s. Only 13% thought they would be able to retire before 60.
