Some experts have estimated that as many as 70% of all those who buy an annuity could be eligible for some form of enhancement. Of course only a small minority of those who are eligible actually end up buying one, meaning thousands of retirees are missing out on a potentially higher retirement income as a consequence. Today we offer five reasons why it is unlikely that Jedi Master Yoda would have purchased an enhanced annuity.
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New research from Xafinity Paymaster has found that more than 8 in 10 annuity providers believe the government must step in to address the unintended consequences of RDR on retirees with smaller pension pots. The company say that an ‘advice gap’ would occur where poorer pensioners and those with small pension pots would not be able to afford financial advice. This would mean that millions of retirees could continue to miss out on a better annuity deal because the new legislation makes getting this advice prohibitively expensive. The problem is only likely to worsen in the years to come because of the introduction of auto enrolment which will increase massively the number of DC pension savers. At present commission from larger funds help to subsidised IFA’s offering advice on small funds. However, post RDR it is thought that most advisers will only be able to concentrate of larger, more wealthier retirees as giving advice on smaller funds will become too expensive and uneconomical. Stephen Womack from the Daily Mail warns that as the cost of getting advice is presented to an individual only those with funds of over £50,000 are likely to want to pay for it.
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