Saga Personal Finance has launched an annuity service designed to deliver better pension income for people with pension pots of up to £100,000. Saga’s new annuity service ensures there is a trusted brand offering competitive rates to meet the needs of the prudent savers of Middle Britain.
The typical pension pot saved by a retiring Briton today is around £30,000 [1]. In fact, over 400,000 people retire every year with a pension pot of less than £100,000 [2].
If people do not check out the annuity rates available before committing to a locked-in-for-life pension annuity they could be missing out on a significant sum. The Saga Annuity Service pays either a flat rate of income or one that increases over time and includes enhanced options for those with medical conditions.
The vast majority of people simply end up taking whatever is offered by their pension provider. In fact only 40% of people take advantage of the open market option[3]. This means that someone with an average pension pot could be missing out on around £300 each and every year of their retirement [4].
Research from Saga Personal Finance reveals that the over 50s would go to great lengths to be £300 a year better off – 37% said they would drive an extra 15 minutes to get to a cheaper supermarket – that’s 13 hours a year[5]. However, the majority of people taking out an annuity do not invest the time to shop around. Those with the average pension pot of £30,000 could make £300 a year with just an eight minute phone call6 to Saga when buying an annuity – that adds up to £7,500 over 25 years.
Andrew Goodsell, Executive Chairman, Saga Group, said: “For too long, middle Britain has been doing the right thing and saving for their retirement; but then at the final hurdle many miss out on the best deals when they come to buy their annuity and are left out of pocket for the rest of their lives. This is a locked-in-for-life decision and too many people are missing out. More should be done by companies and the regulator to ensure that people take up the Open Market Option.
Note:
[1] Legal & General
[2] Watson & Wyatt, In Retirement Study March 2008
[3] Watson & Wyatt, In Retirement Study March 2008
[4] On average the average OMO uplift is c. 20% therefore a male aged 60 in good health with an annuity of £30,000 may have been offered £1,500 income pa from their existing pension provider however if this were to be uplifted by 20% it would rise to £1,800 pa. Giving the customer an additional:
• £25 per month for the rest of their life;
• £300 per annum for life; or
• £7,500 if they were to live for 25 years
[5] Source Populus research carried out online amongst 9,441 people aged 50+ between 7th and 14th September 2009.
[6] Average call time to L&G annuity service, actual call time will vary and the average for Saga customers may be different.
Product range:
The standard annuity will pay either a fixed-income or increasing income for the rest of the client’s life.
The Annuity Plus is designed for those who suffer from certain medical/lifestyle conditions (people who smoke, are overweight or underweight, have high blood cholesterol or diet controlled type 2 diabetes) and may be eligible for a higher income than that offered by a standard Non Profit annuity.
The Enhanced annuity is aimed at those with a more serious health complaint. Clients could be eligible for receiving an additional 20 per cent extra income. Furthermore, if clients opt to provide a spouse’s, registered civil partner’s or dependant’s income, they too could qualify for enhanced terms.
