Age UK will offer information and guidance on annuity rates by telephone as well as online. It says that shopping around could help to boost some retirement incomes by as much as 40%.
Widespread confusion over annuities
Recent Age UK research revealed that 61% of over 55s are confused by financial products. Almost half of those surveyed did not know what an annuity was, with 23% wrongly believing it to be an investment fund.
Gordon Morris, Managing Director of Age UK Enterprises said: ‘Our research demonstrates that many consumers aged 55 and over are confused when it comes to making one of the most important decisions for their long term financial security. This is of particular concern when buying an annuity, which, unlike most other financial products, is a one off purchase and can’t usually be reversed.’
Open market option
Age UK’s initiative follows widespread concern that many people are failing to get the best annuity rate they might by shopping around and comparing offers from different providers. This is known as exercising the open market option (OMO).
Those with a large retirement pot will normally be advised by an IFA before making an annuity purchase, but people with smaller pension savings are less well served. The Age UK Annuity Service has been designed specifically to help and support those in later life who might not know who to ask for more information or may not be able to access the available advice when buying an annuity.
The service is available to those with lower value pension funds and can be accessed either through its online comparison site or telephone service. For more information, call 0845 600 9268 or visit www.ageuk.org.uk.
As well as getting a good annuity rate, those approaching retirement need to make sure they select an annuity that is appropriate to their circumstances. It is particular important to consider your partner’s retirement and whether either of you may qualify for an enhanced or impaired annuity because of health or lifestyle issues. These pay more generously than conventional annuities, but are not offered by all providers.
Annuity purchase has become increasingly important as a growing number of people save with defined contribution (DC) pensions rather than the conventional defined benefit (DB) schemes, which guaranteed an income. With DC schemes, you need to convert your pension savings into a retirement income – and buying an annuity is the most common way of doing this.
Age UK is the most recent organisation to launch an advisory service, but other firms, such as the Annuity Bureau, Annuity Direct, Hargreaves Lansdown and William Burrows offer a similar service.