Pension warning as Britons could lose out on £7,800 through ‘torpor tax’ – act now

When it comes to retirement, many people will be looking for a guaranteed income to secure ease in retirement. However, retirees have been warned not to blindly accept their own pension provider’s offer as they could end up missing out.

Instead, Britons are urged to seek the best rate available to them to find the most competitive deal.

Stephen Lowe, group communications director at Just Group, said: “The difference between the best and worst providers can be up to 15 percent a year extra income.

“The two-thirds of retirees likely to be eligible for extra due to medical conditions or lifestyle factors could enhance that further.

“Not shopping around for that extra income – cash that will be paid every month for as long as you live – is like accepting a ‘torpor tax’.

READ MORE: State pensioners call for ‘at least’ £200 per week for all retirees

In March 2022, shock new figures showed pensioners who smoke or drink heavily may be more likely to get higher income in retirement.

The research showed people could get up to £1,000 a year more because their life expectancy is lower.

It relates to the purchase of an annuity, providing a guaranteed income for life for those who purchase it.

The risk for annuity provides is that the longer a person lives, the more they will have to pay out.

As a result, those with lower life expectancy can receive more because annuity companies believe they can afford to pay higher amounts through an impaired life annuity.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Many people feel they will be penalised for disclosing that they smoke or have a condition that impacts their overall health, but the opposite may be true. It pays to be as open as possible.

“It is therefore vital that you give the provider a full health update at the outset.”

Annuities will not be the right decision for everyone, and consequently, Britons are always urged to seek financial advice to help them make the big decisions.