Daily Express

Shop around to secure the best pension returns

- By Harvey Jones

SAVERS approachin­g retirement are being urged to shop around to get the best deal on annuities and drawdown plans, or risk losing thousands of pounds by simply taking what their existing pension company offers.

Deciding what to do with your pension pot at retirement is one of the most important decisions you will make, as the consequenc­es last for life.

Insurer Prudential has been fined £24million for failing to tell its customers they might get a better annuity rate by shopping around and 17,000 customers are on course for compensati­on worth £6,500 on average.

Prudential took advantage of the fact many people still do not realise they are free to buy an annuity from any provider, so instead they buy what is on offer from their pension company.

GO SHOPPING

The growing number of retirees who prefer to leave their pension invested through income drawdown also need to shop around, experts say.

Once you buy an annuity you

are stuck with it for life and cannot cancel your contract if you later discover you have made a poor decision.

Just six companies provide annuities, Aviva, Canada Life, Hodge, Just, L&G and Scottish Widows. However Nick Onslow, chartered financial planner at The RU Group, said: “How much you get will depend on personal factors such as your height, weight, health, age and where you live, but each company takes a different view of these and will pay different levels of income as a result.”

With drawdown you have far greater choice, as plans are offered by Aegon, Aviva, AJ Bell, Bestinvest, Canada Life, Charles Stanley, Hargreaves Lansdown, PensionBee and many others.

Canada Life technical director Andrew Tully said: “Drawdown plans may all look the same but pay particular­ly close attention to features and charges, as these can differ substantia­lly and could make the difference between thousands of pounds over your lifetime.”

Some plans have a string of complex charges, “while others will have one charge covering everything”, he added.

Many rush their decision because they are keen to get their hands on tax-free pension cash. Tully said: “Others aren’t aware of the options available.”

GET WISE

Stephen Lowe, director at specialist retirement group Just, said around 1,000 people every week buy a drawdown plan but just one in four takes advice, which means they risk getting an inferior deal: “Given the extra complexity of drawdown, this may prove an even bigger problem than for annuities.”

Figures from the Financial Conduct Authority show those with smaller pension pots are least likely to get help. If you do not want independen­t advice you can get free guidance from the Government-backed Pension Wise service at PensionWis­e.gov. uk or by calling 0800 138 3944 to book a free appointmen­t.

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