A recent report from The Financial Conduct Authority (FCA) has revealed that eight out of ten people are reaching retirement age having never switched their pension plans, and are therefore missing out on a higher income.
The FCA’s report concluded that insurance firms are not encouraging savers to shop around, leaving savers thousands of pounds worse off when it is time to retire. By doing so, insurers are making a significant profit while savers are missing out on the best annuity and therefore a higher income in later life. The report found that buying unnecessary annuities is costing savers an average of 7p per £1 saved.
What can savers do?
The majority of savers transfer their pension funds into an annuity scheme, a contract which guarantees an annual income for life. However, once bought, this cannot be changed. According to the FCA’s figures, those who have saved a pension of £100,000 are being deprived of a further £10,000 for the duration of their retirement. This is because too many people accept the annuity offered by their insurer and are not encouraged to shop around.
Ros Altman, a former government pension advisor said to The Telegraph: “Finally, the blinkers are starting to come off at the regulator, which now understands how many people are suffering an injustice at the hands of insurers and brokers.
“The system is biased against customers, who face so many hurdles and such complexity that many simply give up on shopping around.”
Help your employees save for their pension
For many people making regular and substantial contributions to their retirement fund is a tall order that they frequently struggle to fulfil, that is one of the reasons why the government is currently rolling out workplace pension schemes, onto which businesses will soon be automatically enrolled.
Auto-enrolment is being introduced in line with an increase in the pension age that will see those currently in their 20s unable to collect a state pension until they are in their 70s. This means that more people will be younger when they begin saving, and contributing more from their own salaries to their pension funds in order to reduce their retirement age. It is therefore more important than ever that a good pension plan features heavily in your benefits package when aiming to attract high calibre employees.
At Portfolio CBR we can help you find the people your organisation needs to ensure that your employees feel valued. For instance, a compensation and benefits officer will use salary surveys, industry benchmarking and data analysis to enable you to give employees the recognition and benefits packages they deserve at a price your company can afford. For more information about what we do, speak to one our expert compensation, benefits and reward recruitment consultants on 020 7650 3190.