Shopping around for pension income products at retirement

It’s important that you shop around to find the best deal for you, as you would with any other purchase. Your pension provider might not offer the option you want, or others might be able to offer you a better deal – so it’s worth comparing what each provider can offer. Find out what to keep in mind when shopping around, and the specific help available for different products.

Why it’s important to shop around

Now that you have more freedom over how to use your money, it’s even more important for you to shop around – whether you’re looking to get a guaranteed income (an annuity) or another type of retirement income product.

Depending on what you’re shopping around for, what you need to think about and how you go about shopping around might be different.

Check your existing pensions and the options available

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Before you shop around for any retirement income product, the first thing you should do is speak with your current provider to see what they might offer you.

Listed below are the main things to find out:

  • What income options do they offer? Not all providers offer all the options, so find out about which ones they offer and which they don’t.
  • If they have an option you’re interested in, find out how you might get, what features and services they offer to support you and what the charges are (as they can vary). The ‘wake-up’ pack your provider sends you when you reach your ‘selected retirement age’ (the age you agreed to retire) will probably only contain information on the products they offer. So this can be a good place to start.
  • Find out if your pension has any valuable benefits, such as a guaranteed annuity rate or other preferential terms, that you would lose if you moved your pension to another provider.
  • Check if they’ll charge you for moving your pot to another provider. Most won’t but some policies do have charges for exiting the plan. 

Shopping around for a guaranteed income

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When you buy an annuity you usually can’t change your mind, so it’s important to get help and advice before committing to one.

Not all pension schemes and providers offer guaranteed income products. Those that do, might not offer all types, or offer you the best rate.

Your provider is required to give you a comparative quote and to ask you some extra questions to find out if you might qualify for a higher income. 

There are three ways you can shop around to see if you can get a higher income: 

1. Use a regulated financial adviser

Financial advisers will research the annuity market for you and recommend the most suitable product that meets your particular needs and circumstances.

They’ll contact your current pension provider for your policy information, handle all the paperwork and deal with the providers so that everything gets set up quickly.

You’ll have to pay for the advice, although this can usually be taken from the pension and you can find out how much the advice will cost before committing.

You might also be able to claim compensation if something goes wrong. 

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2. Use a broker

Brokers will offer you a non-advised service. This means they’ll explain all the options available, search the annuity market and help you compare.

However, be careful. This can be a cheaper option, but most don't offer advice or tell you which annuity is the best one for you.

The decision is yours and if you choose the wrong one you can't make a complaint or get compensation.

Many brokers will still contact your pension provider for your policy information, handle all the paperwork and deal with the providers for you. Their fee can also usually be taken from the pension.  

3. Shop around yourself

It is possible to shop around yourself, and you can use our annuity comparison tool to search the annuity market to help you see how much income you could get from different options. It will show you how all the annuity providers on the market compare. However, not all of them allow you to buy an annuity with them directly.

Plus, they might still charge you to set up an annuity with them, as you might need to go through some sort of non-advised service. 

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It might be possible to get a better deal this way. However, many advisers and brokers can often get slightly better rates than going direct yourself. Always ask providers if your annuity quote includes any commission or fees.

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Regardless of which route you go down, it’s important to check to see if you qualify for an ‘enhanced annuity’. This type of annuity can provide a higher income for people with medical conditions or lifestyle factors that reduce their life expectancy (for example, smoking).

Medical conditions and lifestyle factors taken into account will generally be the same across providers. It’s likely that each provider will take a different approach to health conditions, and this could result in them offering a higher or lower income.

Shopping around for flexible retirement income (pension drawdown) or products that allow you take your pension pot as a number of lump sums

Flexible retirement income products can be tricky to compare yourself. This is because there’s a lot of choice and what's best for you will depend on many factors.

If you’re considering pension drawdown, it’s important to think about the factors listed below:

Product features available

Different products might offer different options, such as how often you can take income.

Providers might set a minimum on how much you need to have in your pot to set up a product with them, and offer different levels of service (such as information and tools to help you as well as other features). 

The investment choices available

Some providers offer a large range of investments, while others offer a smaller range. Some offer ready-made investment options – such as investment pathways (see below for details) – and others offer more specialist investments.

Think about your needs, experience and how hands-on you want to be with investing your pension and keeping it under review. 

The fees you’ll pay for the product and the investments

Different products have different charges. This can include:

  • initial set-up fees
  • administration charges
  • platform charges
  • investment charges
  • trading fees.

This can make it difficult to compare, as the combination of charges can vary. Some also offer discounts for certain things, which can make it even harder to compare. 

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That's why we strongly recommend getting regulated financial advice. If you decide to go it alone and you choose a product that is unsuitable, you have little protection if things go wrong.

An adviser can look at your financial position, including your attitude to risk and ability to handle the downsides of keeping your money invested in retirement. They’ll then be able to create a financial plan, which will include assessing which products are best to meet your particular needs.

If a flexible retirement income product is suitable, they can look at how much money it would be appropriate to take out of your pot – based on how it might grow and how long it might need to last. 

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Or you could choose to set up and use pension drawdown without advice.

If you want to take money from your pension in this way, you’ll need to make decisions about:

  • how much money to take out and how often
  • which funds and markets to invest in.

You’ll need to regularly review them to make sure your money lasts as long as you need it to, keeping in mind the impact of inflation.

If you’re thinking of going it alone, you should check what your existing providers offers. Although not all pension providers or schemes offer the ability to take a flexible retirement income from your pension pot. If this is the case, then compare this with other options on the market.  

You can approach other pension providers directly to ask them what payment options they offer and to compare charges, services and flexibility.

Some providers will offer you a choice between simple ready-made investment options, which are linked to your retirement plans (these are called investment pathways).

An investment pathway is a ready-made investment option. This simplifies the decision of how to invest your remaining pension pot after you’ve taken your tax-free lump sum. As with all investments, the value of your pot can go up or down.

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If you talk directly to other product providers, ask whether they’re offering you advice and a recommendation or just information.

If they’re offering just information, you must be confident that this option is right for you as you have no protection if choosing to take lump sums turns out to be unsuitable.

If you’re unsure, ask for advice. The provider you speak to might be able to recommend a list of regulated financial advisers or offer their own advice service.

However, if a provider offers advice they’re normally restricted to just recommending their own products. If you want a wider choice, consult an independent financial adviser. 

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Review and shop around yearly for flexible retirement income (pension drawdown) or products that allow you take your pension pot as a number of lump sums

Going into drawdown or taking your pension pot as a number of lump sums is different to buying a guaranteed income (an annuity). This is because you can switch provider or change your income amounts at any time.

So rather than shopping around just at the point you enter drawdown or begin taking lump sums from your pension, you should be regularly reviewing your provider choice, withdrawals and investment strategy – at least once a year.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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