A new idea to boost annuities
Here's a new idea that could boost annuity payouts for many new retirees.
So I was pleased to see a suggestion that could boost annuity payouts for many new pensioners. Michael Jackson, a research fellow at the Centre for Policy Studies, thinks that insurers should create an ‘annuity clearing house.’
Under this plan, whenever a client was three months away from retirement, the pension pot administrator would send the client’s details to the clearing house. These details would include the client’s age as well as any health and lifestyle issues.
Then a range of annuity providers would bid for the client’s business via the clearing house.
If all annuities were sold via the clearing house, all retirees would effectively be forced to shop around for their annuity. As a result, they’d get better rates than many retirees who just accept the first offer they receive from their pension pot provider.
I think this is a great idea as shopping around can boost the size of your pension income by as much as 40%!
Of course, this clearing house idea is just a proposal that may never be implemented. So if you’ve been saving into a defined contribution pension and you’re planning to retire in the near future, it’s essential that you make the effort to shop around for your annuity.
As a first step, check out lovemoney.com’s annuity calculator where you can see how much money you could earn from a top-paying annuity. You can type in any health conditions you may have so you can see the maximum possible income you could get.
Let’s just hope that the annuity clearing house proves attractive to politicians. Then all future retirees will get a top-paying annuity instead of just a savvy minority.