Pensions - Articles - Cost of pension freedom £104m

 The calculation is based on the number of people who bought an annuity in the first six months of pension freedom, of which 60% (or 24,360 people) did not shop around and get the best rate.

 Andrew Tully, pensions technical director, Retirement Advantage, commented: ‘The true cost of pension freedom can be counted in the millions because people haven’t shopped around for their annuity. Despite measures being introduced in April to try and encourage better practice, the situation is getting worse, and the market is failing consumers.

 ‘The issue of poor value extends to drawdown. While drawdown is not a one-off purchase it is still important people look around the market for the right drawdown product, as you could easily find yourself caught out by high charging or complicated products. It will pay dividends to get professional financial advice to help find the right blend of products and the best value in the market.

 ‘Unfortunately, the shopping around message appears to have been lost in the general noise around pension freedoms. We need firm and decisive action from the regulator to ensure the market works in the best interests of consumers.’

 Around 40,600 people purchased an annuity between April and September 2015, of which 60% did not shop around for their annuity, or 24,360 people. Using the average value of annuities purchased (£53,300), the difference between the best standard annuity rate (£3,038 a year) and the average standard annuity rate (£2,824 a year) was £214 a year. Over a typical retirement of 20 years, this will equate to £4,280 less income, or multiplied by the 24,360 customers, £104m1.