What a statement; the failure to get best pension annuity rates could cost £3.3bn. Yes, retirees will lose out on as much as £3.3bn of annuity retirement income over the next 20 years if they don’t utilise the Open Market Option (OMO), warns the Pension Income Choice Association (PICA). A recent study carried out on their behalf by the Oxford Economics showed that in one year alone recorded failings in the review process cost £13.9m in lost pension income, £169 per plan holder, a not insignificant sum.
However, should retirees review their retirement planning options over the next 20 years and secure better annuity rates for themselves, then the study predicts that consumer spending will actually increase by £2.1bn. It would also give the government an immediate improvement in finances of £6.7m through savings on social security payments (benefits) and increased income tax and indirect taxes. These savings could amount to £1.7bn by the year 2030, and that’s quite a saving, I think you’ll agree.
The changes PICA are proposing would ensure that people can enjoy the best income in retirement from their hard-earned pension fund, suggests Hargreaves Lansdown’s Tom McPhail, current chairman of PICA. He added that there could well be a benefit to the government’s finances and a boost to the UK economy. There is no other measure that will achieve such tremendous benefits to the pension savers at no cost, and these important changes should be a priority on any government’s list. To put these figures in some sort of perspective, a change to the retirement planning options process could mean adding more than the cost of a TV licence onto pensioner’s income in retirement, or pay over 30% of the average pensioner’s electricity bill. Higher pension annuity rates can be really beneficial.
The study builds upon PICA’s recent white paper calling for important changes to the annuitisation process at retirement, to help retirees avail themselves of the best annuity rates, and the independent group is lobbying for the way people are treated at the point of their retirement to be changed, with a review of all retirement income options becoming the default option instead of the OMO for retirees to ensure individual personal circumstances are addressed, and higher retirement incomes obtained.
