And this is a conservative figure...it could be as high as £715m
MGM Advantage has revealed the true cost of baby boomers not shopping around for their annuity this year. Around 50% of people retiring each year do not shop around when it comes to choosing their annuity and collectively could be losing out on income worth more than £237m2 over a typical 22 year retirement.
Andrew Tully, pensions technical director, MGM Advantage said: "Having saved hard for retirement, it seems a cruel blow to lock into an annuity with your pension provider unaware you could have shopped around the market to get the best rate. Our research shows there is an entrenched lack of awareness of the ability to shop around for not only the best annuity rate but also the most appropriate product for individual needs.
"The lost income over a typical retirement can add up to thousands of pounds, although we think the numbers are actually on the conservative side. A significant number of people could qualify for a better annuity rate because of existing health or lifestyle conditions, and yet only 4% of people buy an enhanced annuity from the provider their pension savings are with. We have also only looked at the annuity rates from providers competing in the open market. Many providers choose not to publish the rates they offer internal customers.
"The size of the prize is quite staggering as the numbers only relate to the number of people retiring this year. As the baby boomer bubble retires, more and more people will be looking to turn their pension savings into a retirement income using an annuity.
"We welcome the ABI OMO Code of Conduct and other industry initiatives which will make a difference. However these numbers show there is significant progress still to be made. The value of seeking independent financial advice is highlighted by the additional income advisers can generate for clients."
According to Retirement Nation 2012, 42% of the over 55s have not heard of the open market option.
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