We shall call these people Mr. and Mrs. X, for anonymity purposes, but this is a real example of what could have been a pension annuity rip-off. Mr. X, of Essex, retired from his profession as an engineer. His pension fund had been saved up with Barclays, and it amounted to £35,762 at retirement.
He took some tax-free cash, £8940, and was offered an annuity by Barclays on the balance of his pension fund. However, he was able to secure a better rate elsewhere, 25% more, from GE Life (now Tomorrow, owned by LV). His yearly income was £2492, because an enhanced annuity rate was offered as he had been diagnosed with liver cancer.
The point of this story: Barclays did not ask for any details of his medical history, nor do they take it into account when calculating their annuity rates. This is not uncommon !
The message is clear: don’t simply rely on your current pension provider for your annuity. Use your ‘open market option’ and shop around. Mr. X did, and he is 25% better off per year.