A small pension fund to buy that annuity income?

Standard Life have stated that those people nearing retirement with a small pension fund will have little chance of shopping around for an annuity income elsewhere, with the ‘open market option’. For the 28% of its’ investors with a pension fund of less than £5000 there is only one alternative annuity provider. There are only five other providers who will look at the next 22% of Standard Life customers with funds of between £5000 and £9999. As the administrative costs are the same for small pension funds buying annuities as for larger purchases, there is no incentive commercially to look after the smaller pension fund holder. Some larger organisations, like Standard Life and Legal and General, do have the scale to take smaller cases. The expectation is that all will get worse with the introduction of personal accounts in 2012 and the ensuing number of smaller pension funds. The Government may have to step in to improve the annuity purchase situation.