Recently produced individual pension results from Money Management show the average maturity value of With-Profits pensions was £56,518 in the 15 years to 1st January 2007. The top performing policy produced £77,130: 36% more than the average. And yet, failing to claim an enhancement could mean that even a client in the best performing plan could end up little better off than someone in an average fund.
Peter Ellis, head of annuities at Just Retirement, points out that a standard annuity as low as £4,900 per year could be bought with a fund of £77,130, according to the FSA tables, whereas a fund of £56,518 could obtain an enhanced rate of slightly more: £4,934.
Thus, the benefit of selecting a good provider pre-retirement could be completely lost at the point of retirement. This is equivalent to throwing away 3.8% per year in extra performance: something nobody would be happy about.
Viewed from a different angle, of course, selection of the best pension provider pre-retirement and an enhanced annuity at retirement could result in an increase of 73% in the final pension. At a time of grave concern about pension shortfalls, this highlights the value that can be added by advisers at all stages of the pension planning process.
