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Pensioners are missing out on higher incomes


Some pensioners are missing out on a higher income from their annuity because they did not shop around. An annuity is usually purchased through pension savings and pays out a regular income for life.

The Financial Conduct Authority has said that because of this, some pension providers are failing their customers, especially in the case of enhanced annuities. Enhanced annuities are designed to provider a higher income to those with major medical conditions, and some firms have failed to tell customers with a shorter life expectancy that they could get a better deal from a different pension provider.

The FCA has now recommended that providers should be forced to tell customers if they can find an annuity which is better value for money elsewhere.
The FCA has also tried to make it clear to consumers that buying an annuity could still be the best option for some people, even in light of the new government rules about pensions. Since the new pension freedoms were introduced in April, there has been a significant fall in annuity sales.

The FCA said that for people with average-sized pension pots, and a low risk appetite, annuities offer "good value for money" compared with drawdown.

The FCA has also proposed replacing an industry code on pensions with its own rules and, in the longer term, offer consumers a "pensions dashboard" that would allow them to see all their lifetime retirement savings in one place.

Christopher Woolard, the FCA's director of policy, risk and research said:

"The Budget reforms are a game changer for the retirement income market. People will be given more choice and many will want some support to ensure they make the right decisions for them,"

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