Customers helped

How to avoid one of the biggest pension mistakes

Updated 03 December 2020

2min read

Nick Green
Financial Journalist

Having saved hard for your retirement over 10, 20 or even 40 years it is possible to undo years of hard work with one simple mistake, warns Scott Gallacher.


When you finally reach retirement you then have to use your pension pot to provide you with your retirement income (a pension) and unfortunately the majority of people do this is by buying an annuity (pension income for life).  And as reported by the BBC this morning, many lose out on thousands of pounds from their annuity when they buy from their own pension provider instead of shopping around for the best deal.

“On a £100,000 pension fund you could be making a £24,000 mistake by not speaking an independent or whole of market financial adviser”

Unfortunately, whilst this is perhaps the simplest method of obtaining your pension it is also possibly the worst as it seems that loyalty does not pay when it comes to taking your pension benefits.

The Association of British Insurers (ABI) recently published sample rates from 18 of their members and this showed a shocking 24 per cent income difference between the best and the worst rates.  Put another way, you could effectively lose almost a quarter of the value of your pension fund by simply taking the annuity offered by your existing pension provider.

The good news is that it is easy to avoid making this mistake by simply speaking to an independent or whole of market financial adviser, such as you can find on unbiased.co.uk.

While the adviser will charge you for their help and advise, it is highly likely that, even after paying for the cost of advice, you will end up with a much higher pension income for the rest of your life.

In addition to helping obtain you a competitive annuity rate, the financial adviser will also:

  • Explain and discuss all the retirement options available to you, bearing in mind that you don’t have to buy an annuity, as there are other options available,
  • Investigate whether or not you would qualify for an enhanced or impaired life annuity based on your lifestyle or medical history,
  • Help you with all of the paperwork.
  • Give you the peace of mind that you have not undone years of hard work with one simple mistake.

Remember, on a £100,000 pension fund you could be making a £24,000 mistake by not speaking an independent or whole of market financial adviser. If you smoke or have medical issues then the mistake could be even larger as you could be missing out on an enhanced or impaired life annuity.

This is too important a financial decision to simply trust your pension company. As the figures show, pension providers do not seem to reward your loyalty when it comes to taking your pension benefits, so get professional advice today.

Find an independent or whole-of-market financial adviser.

About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.