Customers are still struggling to understand annuity products and aren’t offered enough information, according to research conducted by Age UK Enterprises. Despite calls to make annuity provision more transparent, 31% of respondents who have a defined contribution or additional voluntary contributions pension pot said that they were not made aware by their pension providers that they have the right to shop around for an annuity that best suits their needs
Purchasing an annuity is a once in a life time decision so getting the best rates and the right type of product is crucial. However, a third of respondents (32%) didn’t know about the Open Market Option or what it meant when they bought their annuity. And 38% of customers were not aware that certain medical conditions or lifestyle factors such as smoking could considerably improve their annuity rate.
The research also found that almost a third of over 60s (29%) are feeling uncertain or negative about their current financial situation, for reasons which range from the economic crisis hitting their pension pots (27%) and lack of planning for retirement (18%) to pension pots being much smaller than expected (10%). 3% blame their negative emotions on receiving bad financial advice and therefore failing to make the most of the money that they had.
Gordon Morris, Managing Director, Age UK Enterprises, said of the findings: “It is disappointing to see that customers are still being let down by some pension providers who are still not clear enough about the open market option when discussing annuities. This is a once in a lifetime purchase, so the industry as a whole has to do more to support customers and provide them with the information they need to pick the right product for their lifestyle and needs.
“Shopping around for the right type of annuity and the best rates is one way to enhance your income in later life. No one should simply accept the annuity offered by their pension provider; they should check first if other companies offer higher rates or a product that better suits their needs.”
