New research finds consumers could be missing out on thousands of pounds in retirement by not shopping around for their pension product. This means their pension pot may not stretch as far as they hope it will yet significant proportion of people expect their retirement income to cover much more than just the essentials.
Research conducted by the Pensions Policy Institute for LV= has found that in 2016 there were around 30,000 people who took out an annuity with their existing provider and missed out on additional income by not shopping around. In total, they lost out of an additional £130 million, which equates to on average £4,000 over the course of their retirement.
At the same time, LV= research finds people are increasingly expecting their retirement income to cover more than just the essentials, which means their money needs to work even harder. Nearly six in ten (57%) of those planning to retire in the next five years want their retirement income to also cover home maintenance costs, while 53% want it to cover holidays and a quarter (24%) say they'd like to leave money behind as an inheritance. In addition, one in six (17%) want to be able to use their retirement income to help their children or grandchildren with a property purchase, and 14% would like care costs to be covered as well.
Taking professional financial advice is the best way for someone to ensure their retirement savings meet all their needs throughout retirement, especially as advisers will search the market for the best deal. Yet, the numbers taking professional financial advice are far too low with only 25% of those already retired taking financial advice to help with this decision.
While some people may not understand the need for advice, the value of it is clear to consumers who have used it. Nearly nine in ten (87%) of those who took advice feel confident they made the right choice about what to do with their money while three-quarters (75%) say financial advice helped get more for their money. Revealingly, one in five (19%) who didn't take financial advice say even though they don't regret not using it now, they worry they might in future.
LV= has long been an advocate of financial advice, particularly at the point of retirement where decisions are increasingly complex. The Government's Financial Advice Market Review made many recommendations that will help towards making advice more affordable and accessible to all, yet the reforms will not be fully implemented until 2018. With millions retiring each year, it's vital this issue doesn't drop off the agenda of the new Government and momentum is maintained on this important issue.
John Perks, Managing Director of Life and Pensions at LV=, said: "Last year alone consumers missed out on a staggering £130 million over their retirement by sticking with the same provider when taking out an annuity. This is echoed across the retirement space with consumers failing to access the best retirement products. People are expecting their pension pot to stretch even further nowadays so it's crucial they take control and get support to help them get the most from their savings.
"Government has a vital role to play in encouraging people to take advice and therefore we are urging it to maintain momentum on the financial advice reforms to ensure retirees can get the right retirement solutions for their needs."
LV='s handy pension calculator allows people to check whether they're on track for retirement and how much their pension is likely to be worth as an income at retirement.
Methodology for consumer survey: Opinium, on behalf of LV=, conducted online interviews with 2,404 UK adults between 12th and 27th March 2017. Data has been weighted to reflect a nationally representative audience.
Methodology for amount missed out on in retirement: The Pensions Policy Institute (PPI) reported that around 80,000 annuities are purchased each year, of which 52% are purchased from the existing provider. PPI calculated that if 80% of those who purchased an annuity from their existing provider continue to lose around 6.8% of retirement income that could represent a loss of around £130 million over the lifetimes of those purchasing in annuities in 2016.
 LV= calculated that 52% of 80,000 annuities taken out each year with existing providers, 80% of which would lose out on retirement income, equating to 30,000 people. With 30,000 people missing out on £130 million, that works out as around £4,000 per person throughout retirement.