Smaller pension pots could be disadvantaged at annuity purchase

Employees with smaller pension pots could be at a disadvantage when buying an annuity, according to a report by the National Association of Pension Funds (NAPF) and the Pensions Institute at Cass Business School.

The bodies found that the 80% of pension scheme members with pots of less than £50,000 find most annuity advisers do not consider them profitable enough to advise on.

In some cases, annuity rate bands outside the commonly quoted £50,000 and £100,000 benchmarks suddenly deteriorate, penalising people who could obtain a better rate by having £1 more in their pot.

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Mel Duffield, head of research at the NAPF, said: “There are valid arguments why smaller pension pots are more difficult to deal with, but there are providers and specialist brokers that will service this part of the market.”

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