OAPs miss out on pension pay day

Confused OAP

According to the Pensions Income Choice Association a large amount of retirees are not aware of the income options available through pensions, and are thus losing out on thousands of potential pounds.

The problem extends to pensioners who reside in the UK and also those who are currently UK expats, especially those who plan to return to Britain.

With state pensions on the way out and the number of pensioners collecting set to rise by about 60 percent in the next 20 years it is important for old timers to be completely aware of their options. By simply finding an appropriate annuity a pensioner can see their income soar by around 40 percent. Figures show that a mere third of retirees utilise this option, know as an OMO (open market option).

Tom McPhail, chairman at the Pension Income Choice Association, told The Telegraph: “Unless this or the future government makes changes to the way people select their retirement income product, this country is going to see a future generation of those who can look forward not to golden years of retirement, but years of penury and hardship. People are already missing out on income in retirement – some are missing out on as much as 40 per cent more income because of the current system.

The situation is graver for pensioners who are suffering from poor health as they have even more options that are not being taken up; with an impaired life annuity even more income can be generated. Insurance brokers are currently obliged to make their pension customers aware of these options however the problem is that most people are ignoring these options. Mr McPhail said: “The reasons for such a low take-up is a combination of a lack of education, information and awareness and many people's fund sizes being deemed too small to deal with by financial advisers in 2008, 88 percent of annuities were bought with funds below £50,000”.

The extra income for unwell pensioners can be substantial: “It is estimated that around 40 per cent of people could qualify for an enhanced rate, which can make a significant difference. For example, on a £30,000 annuity the worst conventional annuity will pay £1,921 per annum, whereas shopping around could improve this dramatically. An impaired life annuity for a smoker could pay an extra 21 per cent or £408 per annum.”

Further pleas for improved information systems came from the director of life and saving at the Association of British Insurers, Maggie Craig, said: Too few people are saving enough and are not engaged enough to get the most out of their savings at retirement. There is a clear need to improve people's awareness of their options for taking income in retirement. It also shows provider information is very helpful to those that read it, but that some people do need further encouragement to engage and read their 'wake-up' pack. Further improvements are planned and our approach will increase the number of people who shop around and improve their retirement income under the OMO”.

Those living overseas, or planning to retire abroad can make use of a variety of different options, including those discussed above. Please speak to a specialist financial adviser about your pension options as an expat.