Can you lose money in an Annuity?

What is a Pension Annuity?

Pension Annuities or Final Salary Pensions are a good way of providing for future financial commitments after your retirement for the rest of your life.

They provide a regular fixed income to you, either monthly or annually, from retirement to the date of your death, or a fixed period agreed by you and your annuity provider.

If you have an underlying or existing medical health condition, such as you are deemed to be obese, or you are a smoker, your life expectancy will be lower than the average, healthy person. You would therefore expect to receive a higher annuity payment per annum on the basis that you are likely to die sooner and payments are likely to be made for a shorter period of time.

Are Annuities good?

Annuities have become increasingly popular and are a good way to provide an income to you upon retirement to the date that you die. They not only benefit you, but are also likely to benefit your spouse and your dependents who may rely upon you.

The regular income from an annuity can help you to plan for future financial commitments, such as household bills and any other regular commitments you are likely to have to pay for in future years after your retirement. This can provide much more financial certainty for you as you will continue to receive a regular income from the annuity.

Can you lose money in an annuity?

The FCA has found that the annuities market is not working well for most of its consumers and have undertaken market studies and research into this further.

It is possible for you to lose money in an annuity if your pension adviser did not shop around for the best annuity based upon any existing medical condition(s) you may have.

If the financial adviser did shop around, then this would have greatly assisted them in advising you what the best, and more substantial annuities would have been available at the time you received the advice. 

Unfortunately, not all pension advisers did do this and therefore did not provide the client with the appropriate advice or options regarding their annuities. If this was the case, it is likely that the pension annuity was mis-sold.

What do you do if your annuity was miss-sold?

If you believe you were mis-sold an annuity by your pension adviser, or you are worried your adviser did not shop around for the best annuity product available for you based on your individual circumstances, then it is worth getting that advice checked independently.

The Financial Conduct Authority (FCA) are currently reviewing and investigating this area of pensions due to concerns raised about the mis-sale of pension annuities to date.

Can you make a claim if your Annuity was mis-sold?

If you feel that the pension adviser did not: –

  • take into account existing medical conditions;
  • did not encourage you to shop around;
  • you do not feel enough advice was given to you about the annuity if you died;

Then you may wish to seek independent advice about whether your pension annuity was mis-sold to you.


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