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Spend & Save

Simon Read: Buyers should be handed risk warnings

The annuity market is failing the consumer, according to pensions expert Ros Altmann.

Far from being a low-risk purchase, buying an annuity could be the biggest gamble you ever take in your life, she claims. That's because an annuity is a long-term investment decision, with all the uncertainties that entails, yet people are given no warnings about the dangers of buying.

"If you die soon after you buy a standard, single-life annuity, your pension fund will go to the insurance company, not to your loved ones," Ms Altmann points out. "If you buy a financial product that can lose more than three quarters of your money, it would usually be considered 'high risk' – and those selling it to you would surely have to give you a proper risk warning."

I couldn't agree more. There are so many variables with annuities that it can be a minefield, and a wrong move will leave you much worse off in retirement than you need be. That has to change.