'Unfair' annuity sales wiping up to 50% off income, says NAPF

The NAPF said the problem lay with obstacles that stopped many people shopping around for the best deals.

It also said some insurance firms which sell annuities were guilty of "sharp practice and murky pricing".

"The process for choosing an annuity is a complex one and the majority still go for the "default" option by sticking with their pension scheme provider," the NAPF report said.

"This failure to shop around for a better deal can wipe 30% off their annual pension income, and in some cases up to 50%," it argued.

The NAPF said most people retired with pension pots worth less than £50,000, which was not enough for advisers to make a profit by advising on which annuity should be bought.

But it added few people knew enough to successfully chose an annuity themselves.

And those who were able to shop around may have found the best deals were simply not advertised.

"It is virtually impossible to find a specialist adviser who covers the whole market and who is willing to help those with smaller funds," the NAPF said.

Ken Davy, chairman of Simply Biz, said the lack of support for consumers accessing the OMO presents a more serious threat to them than the retail distribution review (RDR).

"Too many people who have saved diligently for their retirement have been short changed when it comes to their choice of annuity," he said.

"Often they simply tick the box on the form their pension provider sends them without any thought or guidance that they could almost certainly get a bigger annuity elsewhere.

"This cost to consumers is many times greater than the entire consumer detriment being addressed by the RDR."

 

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