Poor pension and annuity choices mean that savers could risk dramatically cutting their retirement income by nearly a quarter (24 per cent), according new a report made by the Pensions Policy Institute (PPI) for the National Association of Pension Funds (NAPF).
The report revealed that savers may have to work well into their early 70s to make up for high pension charges and low annuity rates as a result of failing to adequately plan for retirement.
It also considered factors including paying more into a pension, beginning to save earlier, and working longer, and concluded that an average earner, who aimed to retire in 2055 at the state pension age of 68, could triple their annual retirement income from £2,200 to £7,710 if they weighed up these factors.
The report not only called for employees to seek more competitive workplace pension schemes, but also for employers to negotiate better rates with major pension providers. It said that savers who stick with higher pension charges may have to work an average three years longer than those benefiting from lower charges.
On top of this, the PPI found that a third of people fail to shop around for the best annuity – the most common method of transferring a pension into an income at retirement.
Joanne Segars, NAPF Chief Executive, reiterated the importance of making informed decisions regarding retirement, saying: “By making the right moves, savers can get a lot more for their money without having to pay any more in to a pension. The annuity system can seem complicated but savers can help themselves by shopping around to get the best possible rate. Getting a good deal on charges and annuities can mean the difference between enjoying retirement and spending years more at the desk.”
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