Apathy and a failing system is costing pension savers dear, with retirees set to lose £14m this year on not hunting out the best annuity. If this inertia continues, it will cost Britain’s pensioners a total income of £3.3bn over the next 20 years, according to the study by Oxford Economics, carried out on behalf of trade body, the Pension Income Choice Association (PICA).
At retirement, savers typically cash in their pension pot for an annuity, which provides an income for life. But consumers need to shop around in order to ensure that they get the best deal available to them by using what is dubbed the ‘open market option’ (OMO).
However, only one in three people approaching retirement review their options, according to Oxford Economics. And the current system means that the majority stay with their existing pension savings providers. The study shows that in 2010 alone, failings in the review process means pensioners could miss out on £13.9m in pension income, equating to £169 per policy holder.