By Daniel Hunter
Pensioners shopping around for annuity deals are risking losing out on up to £33 million in income a year as specialist services fail to offer the best deals on retirement income, leading over-55s adviser Key Retirement Solutions warns.
The Association of British Insurers has agreed a code of conduct for annuity providers and launched comparison tables for annuities aimed at encouraging more pensioners to shop around rather than accepting the rate offered by their pension provider.
But Key Retirement Solutions warns many annuity "shopping around" services are only able to offer a better rate for customers and not the best rate as they do not cover the whole market.
Its analysis shows more than 73,000 pensioners used the top 50 annuity brokers for the 12 months from April 2012 to March 2013 cashing in around £2.9 billion of pension funds.
With the average fund value of £39,748 being invested through the top 50 annuity brokers the difference in annual pension income can vary by as much as £457 a year between a better deal and the best deal which is equivalent to £33 million a year across the 73,000 customers, KRS estimates.
The best rates on a £39,748 fund for a healthy 65-year-old are around £2,249 a year while the lowest rates are £1,846 - a difference of 18%. For someone with lung cancer the rates can be as high as £3,926 and as low as £2,680 - a difference of 46%.
Annuity services which do not cover the whole of the market including the best deals for people suffering ill-health will be able to offer a better deal, but not necessarily the best, with the result that pensioners doing the right thing by shopping around can still end up worse off than they should be.
Dean Mirfin, Group Director at Key Retirement Solutions (www.keyrs.co.uk), said: "With more pensioners expected to shop around this year than ever before, it is vital that pensioners secure the best possible rate on their retirement funds. It is simply wrong that many are stopping short and accepting what may be a better rate but not best. Whilst those providers who do not appear on some annuity broker's panels, it can be argued, would only be best for a percentage of customers, those who miss out deserve more.
"Better is not good enough when people are making decisions they literally have to live with - missing out on an extra £457 a year can add up to more than £11,000 lost if you live 25 years after retiring.
"The ABI Code of Conduct and comparison tables are making a big difference but when there are services claiming to help people shop around which do not deliver the best deals some pensioners are going to suffer."
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