Pension savers warned mistake will cost them £14,000 and 'you can't unwind it'

A warning has been issued over an easy pension mistake that could cost you £14,500 in retirement. Experts are warning that an easy mistake could actually cost you £14,500 as you retire amid the ongoing Cost of Living crisis in the country.

Annuities are financial products that offer a guaranteed income stream, and are usually bought by retirees. The accumulation phase is the first stage of an annuity, whereby investors fund the product with either a lump-sum payment or periodic payments.

Buying an annuity is usually an irreversible decision, so it’s crucial to consider your options. How much money you'll get per year depends on every £100,000 you pay in, with £5k for every £100k you invest if the rate is five per cent.

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Helen Morrissey, head of retirement analysis at Hargreaves Lansdown told The Sun: "An annuity is for life, or at least your life in retirement. Once bought you can’t unwind it, so if you make the wrong decision, you could regret it further down the line."

Data shows somebody with a £100,000 pensioncan get anything between £6,532 and £7,255 per year depending on which provider they go with. Over the course of a 20-year retirement, this could add up to £14,500 less retirement income - and £700 a year.

"With these kinds of figures in the mix you don’t want to take the chance that your provider happens to offer the best rate – it’s well worth taking the time to check what else is out there," Helen went on to say. Helen said: "Shopping around for the best rate is absolutely vital, and yet the latest FCA Retirement Income data shows almost half of annuities bought in 2022/23 were from the existing pension provider."

Helen said: "Many people may feel uncomfortable disclosing these details as they think they will be penalised. However, it is vital you put as much information as you can on the form as it could make an enormous difference to the income you receive long-term."