Retiring workers who fail to shop around for annuities to turn their pensions into an annual income risk losing thousands of pounds, an expert has warned.
According to Laith Khalaf, a pensions expert at financial services company Hargreaves Lansdown, there is typically a 20 per cent difference between the top and bottom ends of the market when it comes to annuity rates.
Speaking to the Daily Telegraph, he explained that some people are even able to find annuities that are 60 per cent higher than those offered to them by their pension provider.
Most people will have their pensions paid to them as an annuity because doing so ensures that they receive an income for as long as they are alive.
However, the relative complexity of the market means that the majority of retiring workers are satisfied to stick with the annuities that they receive by default, without shopping around for a better deal.
Mr Khalaf told the newspaper: "The current system encourages people to tick a box and send it back to their pension provider, thereby potentially locking into a lower income for the rest of their lives.
"The government is now looking at ways to steer people towards shopping around because ultimately it is in their best interests to do so.”
Getting the right pension products in place is becoming increasingly important for consumers approaching retirement, particularly as it appears more of their children than ever before will continue to rely on them for financial support during their twilight years.
According to research by Aviva, 18 per cent of parents planning to retire believe that adult children will require financial assistance from them.
Of those, two-thirds (62 per cent) anticipate lending a hand with the deposit for a house purchase, assistance that 44 per cent of children expect their parents to provide.
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