The Financial Services Authority (FSA) is to announce that it intends to investigate the Annuity market to see how many people are losing out by not shopping around for the best Annuity rate when they retire.
The Annuity market in the UK is worth a reported £11 billion each year to the insurance industry. However, there has been rising concern amongst leading financial experts and special interest groups that would-be retirees are losing out by buying uncompetitive Annuities.
Most retirement experts have welcomed the review, with many believing that it is long overdue.
The Financial Times is reporting today that the FSA will look at pricing data to calculate how much retirees are losing out by not shopping around for the best Annuity rate. The newspaper goes on to say that it believes the FSA will focus on those Annuity providers who offer the most uncompetitive rates but who transact relatively high levels of business.
The latest FSA review comes after they released figures in 2010 which showed only 40% of people shopped around when they bought their Annuity, with the majority simply accepting the Annuity offered to them by their existing pension provider.
Any pension Annuity comparison shows how far rates have plummeted over the past few years. Indeed a survey by MGM Advantage last week revealed that rates dropped by 11.7% during 2012 and by a massive 21.6% since August 2009. Add in the difference of up to 25% between the best and worst Annuity rate and it is clear that many retirees will have to put up with smaller retirement incomes than they had planned for.
Retirement experts also point out that buying an Annuity is only one option to create an income from a pension fund and that whilst shopping around for the best Annuity rate is important, would-be retirees should also consider other options such as an Enhanced Annuity, Fixed Term Annuity or Income Drawdown.