Small Pension Annuities Stay Put

Small Pension Annuities Stay Put

Research by the Association of British Insurers (ABI) has revealed that consumers with smaller pension funds have comparable lifetime gains on annuities regardless of whether they are purchased internally or externally.  

The report estimated two-thirds of consumers shopped around, with the same ratio of personal pension annuities being sold internally.  However, those doing so had a smaller average pension fund of £13,000 than those who purchased externally (£24,000).  Almost half of those who purchased their annuity internally have pension funds of less than £10,000 yet 85 per cent of customers purchasing a single-life annuity do so at a rate of at least 95 per cent of the highest external rate.  

Our view

The facts remain that many annuity providers will not accept pensions funds of values of less than £5-£10,000 unless they are part of a bigger transfer.  For a smaller annuity fund, transferring and buying externally can mean the difference of a few pounds and not hundreds of pounds, however the provider needs to cover its costs.

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