Do you know what an annuity is? Don’t worry if you don’t as most people only have vague idea, according to some recent research. Even less people know that it is vital to shop around to get the best deal, a process known as the open market option. Because annuities can be pretty complex, when people buy one most take the easiest and most convenient route which is purchasing one from their incumbent pension provider. Although this causes less hassle, it can and often does mean people missing out on a higher income in retirement. This is because not all providers offer the same products and rates. In fact an annuity quote should be done on a bespoke basis, in accordance with the individual needs of each person. However, in the majority of cases this process does not occur, people buy their annuity without comparing the market.
You would think that, given that you can only get the best annuities by comparing the market, everyone would go through this process. Alas, this is not the case because of the reasons already stated. The annuity providers by and large don’t help you much either, as many of them will knowingly sell their customers a poor value annuity. Despite a recent code of conduct introduced to help raise awareness of shopping around, the majority of retirees ignore such advice and take the first offer from their current pension company. Until it is made explicitly clear that comparing the market is essential or the open market option is made compulsory, the situation seems unlikely to change radically.
It is not as if us Brits are averse to shopping, especially for insurance products. The past fifteen years has seen a massive growth in comparison websites, which allow users to produce real time quotes. An annuity cannot be compared in the same way as, for example, car insurance can. A full and compressive annuity quotation requires detailed medical information plus consultancy over which type of annuity products are attractive (there are dozens of these). An annuity may not even be the preferred option as there are alternatives such as drawing down your pension fund.
You can see with all this financial jargon why so many of us are put off annuity shopping. There are so many other more enjoyable activities in life. However, by spending some time learning about annuities, however dull that is, you could get a much higher income in retirement. Some annuities, such as enhanced annuities, pay on average 20% more than standard annuities. These are for those retirees who have a medical condition that can impact on life expectancy. Most of those who buy an annuity qualify for enhancements but, as it suits providers not to tell you this, often you will end up with a standard annuity. That is, of course, unless you decide to shop around.
Article by Annuity City.
The twelfth and final episode of 
I’m rather late in posting my book review this year. To be honest, I’ve been putting it off as it takes quite a long time to write.