With the number of pensioners set to increase by 60% over the next 20 years, the Pensions Income Choice Association (PICA) has launched a campaign to publicise the importance of optimising value in retirement.

Despite the availability of a wide range of bespoke products on the market and the FSA rules introduced in 2002 requiring pension providers to inform consumers of their options, the number of people exercising the open market option (to shop around for the best annuity product and rate) has not seen any material increase over the last five years.

PICA cites a lack of awareness and the failure to provide clear information for the poor uptake of retirement options. Modest pension pots (88% of annuities bought for under £50,000 in 2008) are also responsible, as they are considered too small for financial advisors to deal with.

A detailed economic study has been commissioned by PICA to quantify the cost to the UK of the lost income, with previous estimates totalling between £1.5 and £2 billion. The association also highlights the importance of a comprehensive retirement review for those approaching retirement in ill health or with lifestyle issues such as smoking.

Acting chairman of PICA Tom Mc Phail remarks: ‘The need to maximise income in retirement is universal, but never has it been more important. The move from generous final salary, or defined benefit schemes to less valuable defined contribution plans, the erosion of state benefits, collapse of personal savings and increases in life expectancy will create a new underclass of retirees struggling to make ends meet and maintain their standard of living.’

Mc Phail continues : ‘At the moment the vast majority of those who review their retirement options are those who have financial advisors. The industry must make it easier for all people making irrevocable decisions about their pension income to get advice, regardless of the size of fund they have. Nobody should be excluded from having enough information to be able to make an informed decision.'