Putting off selecting an annuity can reduce the return on pensions savings according to Chatfield Private Client, a firm of Independent Financial Advisors.
The firm is calling for people to take annuities into account at an early stage of the process of taking out a pension.
Director at the firm Jason Ashman said: “What we are finding is that a lot of clients aren’t coming to advisers soon enough.
“It is no good actually thinking about retirement planning within six months of retirement.”
In order to achieve the best pensions returns, Mr Ashman suggests that people should consolidate savings into a good return package around five years before retirement.
In related news, a new ruling could help those with small pension pots as it will allow them to convert their holdings into cash lump sums.
From April, people aged over 60 whose pension rights total more than £18,000, including one or more pots worth less than £2,000, will be able to take the small personal pension holdings as cash.
Currently, only those who have less than £18,000 in total can take their small pension pots as a cash sum.
This means they have to purchase an annuity with each of the small funds, which may only generate an income of as little as £6 a month.
The ruling will enable people who have worked for several different employers and who therefore have a several small pension funds, to consolidate them, providing a bigger pot with which to buy an annuity and increasing the chance of securing a better rate.
Having just one pension, rather than several, also makes it easier to monitor performance.
However it may be best to seek professional advice before consolidating funds as exit and transfer penalties must be taken into account when calculating benefits.