Financial Advice - NOVEMBER column

Date published: 01 November 2009

ANNUITIES - What to do?

Starting school, first job, getting married — each stage of our lives can be challenging. But preparing for retirement is probably the most daunting and complicated.

Yet each year thousands of us make the mistake of missing out on the best return we could get from our pension. The Financial Services Authority estimate that retirees could be losing out to the tune of £500m a year!

The mistake is a simple one. Not reading the small print. Because when the time comes to take your pension we all have the right to the ‘Open Market Option’ (OMO) which simply means offering the funds in your pension pot to other providers to see who can offer the best deal.

However, according to the FSA two thirds of us either don’t know about OMO or don’t care and we simply roll the pension funds straight into an annuity with the provider it has been built up with.

What difference does it make? Well in a recent survey of 55 providers there was a gap of about 20% between the top and bottom rates. And that figure could grow if you were had a medical or lifestyle condition that may affect life expectancy.

Clearly the OMO is worth considering which is why it is advisable to visit an Independent Financial Adviser (IFA) before making any decisions. IFA’s understand what has to be done and how to go about getting you the maximum return on your pension fund.

An initial meeting with most IFA’s is free and without obligation, it might turn out to be a very valuable hour for you.
That hour could be even more valuable if you have a collection of pension funds built up over the years. It never ceases to surprise me the value we have extracted from carrier bags full of curled and aging pension papers that pass across my desk. My surprise is matched only by that of the client and it’s one of the few times you can get a kick out of shuffling papers.

What’s an hour when you consider it could have an impact on the rest of your life?
Clive Balchin is a partner in James Trickett and Son
90 Bank Street, Rawtenstall
telephone number 01706 831132