Pensions warning as Brits could lose £7,800 from ‘torpor tax’ – act now | Personal finance | Finance
When it comes to retirement, many people will be looking for guaranteed income to ensure a comfortable retirement. However, pensioners have been warned not to blindly accept their own pension provider’s offer or they could end up missing out.
Instead, Britons are advised to research the best rate available to them to find the most competitive deal.
Stephen Lowe, Group Communications Director at Just Group, said: “The difference between the best and the worst providers can add up to 15% more revenue per year.
“The two-thirds of retirees who may be eligible for a supplement due to medical conditions or lifestyle factors could further improve this.
“Not shopping around for that extra income – money that will be paid out every month for as long as you live – is like accepting a ‘torpor tax’.
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In March 2022, shocking new figures showed that retirees who smoke or drink heavily may be more likely to get a higher income in retirement.
Research has shown that people could earn up to £1,000 more a year because their life expectancy was shorter.
This is the purchase of an annuity, providing guaranteed income for life to those who purchase it.
The risk with annuity is that the longer a person lives, the more they will have to pay.
Therefore, those with shorter life expectancies may receive more because annuity companies believe they can afford to pay higher amounts through an impaired life annuity.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: ‘Many people think they will be penalized for disclosing they smoke or have a disease that affects their overall health, but the opposite may be true. It pays to be as open as possible.
“It is therefore essential that you give the supplier a comprehensive health update from the start.”
Annuities will not be the right decision for everyone, and therefore Britons are always advised to seek financial advice to help them make the big decisions.