Those embarking on an unsecured pension, also known as income drawdown are being troubled by “unrealistic critical yields quoted by insurance companies”. That’s the view of annuity specialists Annuity Direct. They add that advisers are making assumptions that are not accurate and so those who choose this option could be ending up with substantially lower returns than first anticipated.
The law states that those who offer income drawdown must offer a ” type A critical yield” for the potential customer. This is used so that the customer can work out the likely return so as to work out the annuity rate. Two mistakes appear to be being made by providers; one is that they are basing the calculation on their own rates, which may not be the best in the market and secondly that they are failing to factor in enhanced elements such as poor health and smoking. The company advise that those wanting to opt for income drawdown should speak to an adviser who will compare all the rates available on the open market option so that they get the very best rates.
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