Better pensions on the open market

Pre-retirees who shop around for an annuity are 50 times more likely to get a better income than those who stick with their existing pension company, according to new research.

Figures from the Association of British Insurers (ABI) show that just 358 out of 73,000 retiring investors who bought an annuity from their original pension provider in the third quarter of 2009 selected an enhanced annuity paying higher rates.

Enhanced annuities are available to those who smoke, or suffer from certain medical conditions, and can pay thousands of pounds more than standard annuities, due to the shorter life expectancy of the annuiant.

Investors who took up the “open-market option”, to buy an annuity from any provider were more likely to get a better deal: 24 per cent bought an enhanced annuity.

“More needs to be done to ensure those approaching retirement exercise their right to shop around for the best income,” said Tom McPhail of the Pension Income Choice Association.