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Find out moreThe Association of British Insurers (ABI) has released figures showing almost three quarters of customers choose a non-advised service when purchasing their pension annuity. The data revealed that:
Annuities bought without advice are either direct from the annuity provider (often the pension provider the customer has saved their fund up with over the life of their career) or via a third-party retirement income specialist, such as Retirement Line. Usually commission is paid to the third-party by the pension provider for arranging the sale, without an upfront fee for the customer to pay.
This is in contrast to the lesser-popular regulated advice, which involves consumers themselves agreeing to the service they want to receive and that a fee will be paid by them to the adviser.
Pension and retirement choices are amongst the most important and complex financial decisions people make in their lives. Unfortunately, the figures tie in with those released by the Financial Conduct Authority, which revealed a huge 64 per cent* of people who purchased an annuity between July and September last year did so through their existing provider - potentially missing out on securing a bigger income for life.
There are a number of possible reasons for savers not shopping around, or instructing a retirement income specialist to search the market on their behalf. It seems many could be feeling the pinch and choosing not to pay for financial advice, or perhaps experiencing a degree of apathy or lack of knowledge about how beneficial shopping around for their pension annuity can be.
In the release by ABI, the organisation stated: “Regulated financial advice will be needed and wanted by some, but not all consumers. Whilst we appreciate the reasons for the costs of financial advice, there are concerns about the affordability of financial advice”.
“This is especially the case for customers who have smaller and medium sized pots who may not want to spend up to and over £1,000 on advice.”
Those who do instruct a non-advised specialist like Retirement Line to shop around for a better rate than what their current provider has offered them could benefit from significantly better rates.
In the middle of January there was a huge 17 per cent* difference between the best and worst annuity rates, which could affect a person’s income by thousands of pounds over their retirement.
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