Tesco has announced plans to launch a pension annuity comparison website. It has submitted an application to the regulator, to ask permission to run a service. If it is accepted, it could transform the annuity market.
So what would it mean for you and your pension?
The serviceTesco would essentially be setting up an annuity brokerage. The idea would be that if you have a defined contribution pension (also known as a money purchase pension, personal pension or group personal pension) then when you retire you will have saved a pot of money.
This pot will usually be spent on buying an annuity, which converts it to an income for life. When your pension provider writes to you on retirement they'll make you an offer for an annuity, and at the moment most of the 400,000 people retiring on this sort of pension every year simply take that.
However, everyone has the right to shop around for a better deal, which can make an enormous difference to the income they can receive in retirement. The best and worst deals can differ by as much as 25% - and those who qualify for enhanced annuities can get another 20% income on top.
At the moment there are no details as to whether it will search the whole of the market, or just a handful of annuity providers.
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What it means
Tom McPhail, Hargreaves Lansdown Head of Pensions Research and Chairman of PICA says that in essence this is good news for consumers. He explains: "We have been campaigning for years now for a more active shopping around market at retirement; we believe it should be the default for everyone."
He adds: "It is vital that everyone who can, makes sure they benefit from an enhanced annuity, as well as considering inflation proofing and death benefits for their dependents. The more high profile participants there are in the shopping around market, the more likely it is that this will happen."
The company is currently the largest annuity broker in the UK,and has recently launched its own online annuity comparison tool, but he insists it isn't scared of the competition, because everyone stands to benefit as the market grows.
McPhail says: "PICA is developing a directory of shopping around intermediaries precisely because we anticipate that we will see more services being launched; every little helps."