The reduction comes in the wake of the Financial Conduct Authority’s recent review that highlighted a lack of competition and options for retirees with smaller pension funds, leading to lower retirement incomes.
The fund size is the lowest of any specialist enhanced provider on the open market.
Stephen Lowe, group external affairs and customer insight director at Just Retirement, said: “Our move should provide extra confidence that shopping around, even with modest pension pots, is definitely worth the effort. This is particularly true where there are health or lifestyle
factors involved that could make a big difference to the income being offered.
“The FCA made it clear that where pension savers shop around for their retirement income, they are far more likely to achieve good outcomes. Unfortunately large numbers accept what their own pension provider has to offer and eight in 10 of them end up worse off as a result.
The FCA’s thematic review found that in 2012, 27% of annuities sold to existing pension customers were for fund sizes of less than £5,000.
It found little promotion of shopping around and said that while rates might be lower due to higher fixed administrative costs “it is clear that those with small pension funds are not well served in this market”.
Lowe added: “The pot sizes may not be big but the numbers of pensioners involved is huge – more than 50,000 annuity purchasers each year – and most simply can’t afford to make poor choices.
“Going forward we expect further reform of the system but until there is more progress our move should help many of those with small pension pots achieve better annuity outcomes.”
Since 2004 Just Retirement has actively campaigned to promote the benefits of the Open Market Option, helping more than 130,000 customers achieve a better income through personalised rates that reflect their health and lifestyle.
At present most pension savers aged at least 60 can take up to two pensions as lump sum payments if they are worth £2,000 or less, or all their pension savings if they total £18,000 or less.
