Most of us have an innate desire to get the best possible deal – no matter what we are shopping for. There is something quite satisfying about knowing that you ultimately paid a much lower price for an item than is offered by other retailers.
And you only have to type ‘getting the best deal’ into Google to bring up pages of websites dedicated to tips on how to shop around most effectively.
But it seems that this isn’t the case in all markets. Sometimes charges can be so complex and vary so greatly that comparison is difficult.
According to research published this week by Which?, this is certainly the case for those looking to take advantages of the options available under the pension freedoms, which came into effect in April.
Its analysis of 18 insurers and investment brokers found that, among those offering income drawdown, for example, providers’ charges vary by more than £3,000 in a decade for individuals with a pension pot of £50,000 who take 4% a year in income drawdown.
Meanwhile, those with a larger pot of £250,000 who take 6% in income drawdown each year can expect to see a difference of more than £10,000 between the cheapest and most expensive provider over a 10-year period.
In both instances, these are significant sums.
With charges varying so greatly across the market – some companies don’t charge a fee at all – how can employees know how the deal they are being offered stacks up?
Should the government place a cap on charges?
Should providers be required to be more transparent and upfront about their charges, what these include and how market competitive these are?
Or is it a case of providing individuals with more information or education about the need to shop around and what they should be looking for?
One thing is clear: greater transparency is needed unless the market is to run into some of the same issues as it experienced with the old system of annuities.