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State of Retirement 2017: Chapter 2

Posted 12 July 2017

State of Retirement: How switching pension providers could save you money

Following on from the first chapter of the State of Retirement report which explored how much time people were spending planning for retirement, the second chapter reveals how many consumers are losing money by sticking with the same provider.

in 2016 around 30,000 retirees could have got an average of £4000 more through retirement by switching annuity provider

The flexibility of the pension reforms means that you don’t have to take out the annuity your provider or scheme offers. You’ve got the option to shop around for a better rate and to find an annuity that better suits you – this is the open market option.

The State of Retirement research found consumers could be missing out on thousands of pounds in retirement by not shopping around for their pension product. Research by the Pensions Policy Institute [1] found in 2016, more than 30,000 retirees who took out an annuity with their existing provider missed out on additional income by not shopping around – in total they lost out on an additional £130 million, which equals on average over £4,000 each over the course of their retirement [2].

Stretching your retirement income

LV= research also found that many people expect their income at retirement to cover more than the essentials. 57% of those planning to retire in the next five years would like their income to also cover home maintenance costs, 53% would like the income to cover holidays and 24% said they’d like to leave money behind as inheritance.

As well as this, 17% would like to use their income to help their children or grandchildren with a property purchase and 14% would like care costs to be covered. For your retirement income to stretch to the extra retirement costs, it means your money needs to work even harder.

57% want their retirement income to cover home maintenance costs, 53% want their retirement income to cover holidays, 24% want to leave their retirement income behind as inheritance

Understanding the need for financial advice

Planning for retirement and getting financial advice is still quite a daunting prospect for many, however the value of this advice does start to become clear to consumers who have used it.

Over eight in ten (81%) of those who took advice feel confident that they’ve made the right choice about what to do with their money, while three-quarters (75%) say financial advice helped them get more for their money.

In addition, the research also found that nearly 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 the future.

Last year alone consumers potentially 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.

John Perks, Managing Director of Retirement Solutions at LV=, said:

LV= has long been an advocate of financial advice, particularly at the point of retirement where decisions are increasingly complex.

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.

What's next?

The Government’s Financial Advice Market Review made several recommendations 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

Download our State of Retirement: Chapter 2 infographics to see some of the key statistics.


Methodology for consumer survey: Opinium, on behalf of LV=, conducted online interviews with 2,404 UK adults between 17th 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. [1] Source: PPI briefing note "What is the impact of not shopping around for annuities?"

[2] LV= calculated from the PPI figures that of the 52% of 75,355 annuities taken out in 2016 with existing providers, 80% of these would lose out on retirement income, equating to 31,347 people. With 31,347 people missing out on £130 million, that works out as £4,147 per person on average over the course of their retirement.

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