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Annuity delays could cost retirees thousands
4 September 2008 11:30
The prevalence of long delays in annuity transfers could reduce pensioners' retirement incomes substantially in the long run, according to a new report.
In the Financial Services' Authority's recent review of the pensions sector, 60 per cent of the 238 annuity transfers it assessed were not completed on time, largely due to the excessive complexity of this process and the welter of paperwork it involves.
Now Virgin Money's new study has shown that while a 65-year-old man with a £100,000 pension pot could expect to retire with an income of around £7,740 a year, a three-month delay in his annuity transfer could cost him £1,935 in total.
Moreover, if annuity rates were to decline by 0.5 per cent during this time, then the pensioner in question would see his annual retirement income fall to £7,240, resulting in an overall loss of over £10,000 over a 20-year period.
Virgin Money spokesperson Scott Mowbray warned that any losses incurred by retirees through annuity transfer hold-ups will affect them for life and urged pensions providers to maximise their incomes by making the transfer process as smooth as possible.
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