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.

Sign up to our newsletters

Receive news and guidance on a range of HR issues direct to your inbox

This field is for validation purposes and should be left unchanged.

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.”

Read more about pension annuities