When asked why they wouldn’t consider switching provider more than one in ten (14%) said they wouldn’t know where to start, while 12% also thought it would be too involved or complex. Other reasons given for not considering switching included thoughts it could take ages and delay access to income (9%) while some thought it could only be done through seeking regulated advice (7%).
Nick Flynn, director of retirement income at Canada Life said: “Data recently published by the FCA shows that many people are not shopping around when choosing their annuity and that suggests the ‘information prompts’ introduced in March 2018 have had little effect. Around one in ten people who plan to buy an annuity when they retire will simply buy direct from their current pension provider, irrespective of the income they are offered. This approach is unlikely to provide them with the best deal or the best type of annuity for their individual circumstances and will lock them out of extra income that could be available. As an industry it is up to us to do more to ensure customers do not get a poor deal.
“Buying an annuity is a significant financial step and an adviser or annuity broker will always be best placed to help you understand the choices available.”
Canada Life recently published data showing the ‘tipping point’ of additional income that is required for a customer, who is already likely to buy an annuity, to choose to move pension provider. The demand curve showed that ‘tipping point’ to be around £500 extra annual income. This ‘tipping point’ was the same across many customer groups and largely unaffected by the value of the pension or whether the customer will seek guidance or advice.
The data also revealed that around one in ten (14%) of all customers who plan to buy an annuity at retirement won’t consider changing their provider, irrespective of the additional income that might be available from an alternative company.
Data recently published by the FCA showed that of the 60,383 annuities sold between April 2021 and March 2021, 42% were sold without regulated financial advice or Pension Wise guidance, while 53% were sold to existing customers. 40% of pensions used to buy annuities were value at £50,000 plus pot sizes, with 35% of annuities on an enhanced basis.
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