- Savers are still not shopping around for the best deal at retirement, and this is losing annuity customers £385 income a year, or £7,700 over a 20-year retirement1
- FCA data1 over the last two years shows that around 2 in 5 people didn’t seek guidance or advice before buying an annuity, which equates to 63,966 savers
- Canada Life has called this ‘FOMO’ or the ‘Fear of Open Market Option’ – the ability to shop around and secure the best retirement income
Canada Life has used industry data to calculate the lost income due to savers not shopping around when they come to choose their guaranteed retirement income. Around 30,000 savers each year, or two in five of the people who chose a lifetime income, lose on average £385 a year, which over a 20-year retirement equates to around £7,700 each. This is based on the average purchase price for an annuity (£60,515) and comparing the best and worst annuity rates available in the open market.
The ‘Fear of Open Market Option’, or FOMO, will according to Canada Life cost savers as annuities once bought cannot be traded or unwound, locking savers into potentially poor deals for their whole retirements.
Nick Flynn, director of retirement income at Canada Life said:
“The official data shows attitudes are firmly entrenched as two in five people fail to seek guidance or advice and simply don’t shop around to get the best deal in retirement. Once an annuity has been purchased you can’t turn the clock back so these customers will be losing thousands in income over the course of their retirements. Do it right, do it once.
“As an industry we have a duty to ensure people receive the best value they can from their hard-earned pension savings and too many people continue to accept the offer from their current pension company. This may be down to trust, or simply a lack of awareness of their options.
“The truth is that our numbers probably paint a more positive picture than the reality as many annuity providers don’t publish their rates or compete in the open market for business, relying on customer inertia alone to sell. Fear of the Open Market Option will leave many falling short when it comes to getting the most value from their pensions.
“Seeking free guidance is a first simple step on the path to making the most of your retirement options. From there a financial adviser or an annuity broker will provide the advice or support needed to ensure you get the best value from your pension savings, alongside the right guarantees and blend of secure and flexible income.”