You've spent years putting money aside into a pension scheme, but what actually happens when you retire? Sadly, it's not as simple as simply withdrawing the money. You must now convert your pension pot into an income, which is typically done by buying an annuity.
Thousands of people should end up with bigger pensions as new rules will force insurers to inform customers about better annuity options. The ABI new code of conduct forces insurers to give more information about how consumers can 'shop around' for a better deal, while ensuring that those with health problems receive a higher income as a result.
Currently, according to the ABI (Association of British Insurers), more than half of all investors who buy an annuity – which pays a fixed income for life – simply buy the default annuity deal from their current pension provider. As a result, many end up buying the wrong type of annuity or effectively locking into uncompetitive pension deal for the rest of their lives. Shopping around for the best annuity deal could increase the size of pension by over as third. A recent report from the National Association of Pension Funds claimed that this was costing pensioners more than £1bn in lost retirement income.
The new rules stop insurers from including an application form in the information pack sent to customers approaching retirement, making it less likely that people will simply buy the first annuity they see. These 'retirement packs' have been redesigned to place greater emphasis on the benefits of shopping around. Crucially, where insurers are selling an annuity to one of their existing customers, they will be required to ask about their circumstances and medical conditions before providing a quote... Click Here to read further and to download 'A Guide to Annuities'.
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