Annuity confusion costs thousands
Filed under: Pensions
However, by relegating the decision of which annuity to buy to something below the burning issue of who to vote for on Strictly Come Dancing, we are depriving ourselves of tens of thousands of pounds.
Penions Tools & Tips
Retirement Tips & Tools
MisunderstandingAccording to research from MGM Advantage the first, and biggest hurdle, is that we haven't a clue what we're doing when it comes to annuities. Seven in 10 over 55s do not fully understand what annuities are, while a third were unfamiliar with "any details" and just 37% had a vague idea of what an annuity was.
It means more than three quarters of over 55s do not fully understand what the OMO is and a third haven't the slightest clue. And this where things start to go wrong.
Shopping aroundThe OMO, or open market option, means that rather than accepting the annuity offered by our pension company we have the right to shop around. Exercising that right can make a dramatic difference to the income you can get in retirement from your pension pot. In fact, it can double your retirement income.
Craig Fazzini-Jones, Executive Director, MGM Advantage said: "There's no doubt that more must be done to raise awareness of annuities and the importance of exercising the OMO to shop around. It is grossly unfair that those who are most in need of additional income in retirement are unlikely to be able to afford the services of an IFA, or be aware of the benefit of shopping around for better annuity rates and higher income in retirement."