Britons are missing out on billions at retirement by failing to shop around for the right annuity.
Instead of exercising the open-market option, most savers are choosing to simply accept the annuity income offered by their pension company.
What's more, people with medical conditions such as high blood pressure or diabetes are particularly losing out as they are accepting an annuity income based on their being in perfect health, rather than a potentially higher income reflecting a reduced life expectancy.
Figures from pensions advice firm Just Retirement show that up to 65 per cent of retirees could qualify for what is called an enhanced annuity – a higher than normal income – due to medical conditions, but, in fact, only around one in 10 apply. In cases where savers have serious medical conditions such as kidney failure, or if they are awaiting an organ transplant, Just Retirement estimates that an enhanced annuity could net them nearly 40 per cent more than a standard annuity bought from the pension provider.
Even something as simple as a pension saver smoking 10 cigarettes a day could mean they qualify for an enhanced annuity income more than 10 per cent higher than that of a healthy non-smoker.
But it's not just apathy that is responsible for pension savers missing out, says Stephen Lowe, customer insight director at Just Retirement: "This has a lot to do with how the pension firms market themselves. When people reach the age at which their pension is due their provider sends them a document which asks them to tick if they want to receive an income now.
"The majority tick this box not realising that by doing so they are merely taking the income offered by their pension company, when if they don't tick it and shop around they are far more likely to get a better deal."Reuse content