Those buying an annuity who do not compare providers for the best deal are on average £248 a year worse off according to retirement specialist Key Retirement Solutions. They conducted a survey which found that over 50′s that shop around for the best deal can boost their annuity income by an average of 21%. However millions of retirees are missing out on this extra cash because they are not aware of the need to compare providers in order to get the best rates. The aggregate amount of money that UK retirees are missing out on has been estimated at £124 million based on the fact that over half a million annuities are purchased every year. Around two thirds of all those who buy an annuity are thought to be eligible for better paying enhanced annuities, but only a fraction of those are actually getting the maximum income available. The situation is far worse in the non-advised space, as MGM technical director Andrew Tully told IFAonline earlier this month…”…in the advised space, [enhanced annuities have] gone from being a relatively niche product to around 40% of retirement sales. Where it has not really grown is in the non-advised space, so I imagine that will develop more. Potentially 60% of people could get an enhanced annuity whereas at the moment it’s only around 25%.”
Joanne Segars from the National Association of Pension Funds described the OMO issue as a huge problem, saying that retirees were in effect being short changed. She told the Express newspaper that it was vital that annuitants shop around for the best deal and that those with medical conditions needed to study their options. Dean Mirfin from Key Retirement Solutions said it was simply wrong for those buying an annuity to accept a lower rate when by spending a few minutes speaking to a specialist they could increase their income by an average of 21%. Nigel Barlow from enhanced annuity specialist Partnership says there is a lack of understanding around which conditions can enable an individual to get a higher rate. Although it is only the most serious conditions which offer the highest increments in retirement income, there are hundreds of minor conditions that can also boost the rate offered. A detailed examination of one’s medical history can often uncover ailments which the individual may have failed to declare but which could increase their annuity offer.
A recent survey of financial advisers found that 54% believed enhanced annuities would be the main growth area in the future. Since 2009 the market has already increased by 24%, however given the fact that they only represent 2% of non-advised sales, there is still a long way to go.