Failing to shop around when buying an annuity can easily lose pension savers thousands of pounds, but retirees delaying purchase until later in life risk losing the most income.
More than 1,500 annuities were sold every week in 2023/24 but four in 10 (41%) are to retirees buying from their existing pension provider according to figures released yesterday by the FCA, raising concerns many may inadvertently be choosing convenience over value.
Analysis of current annuity deals by retirement specialist Just Group shows significant gaps between the best and worst income on offer, and that older buyers face a much higher income gap than those buying at younger ages.
A healthy 75-year-old can secure 20% more income from the best annuity provider compared to the worst. The best-worst gap is 18% at age 70 and 13% at age 65. The income offered could be higher once medical history and lifestyle factors are disclosed.
Stephen Lowe, group communications director at Just Group, commented: “The gap between the best and worst deals has been rising through this year. That is true for all ages we track but is currently particularly high at 20% for buyers aged 75.
“Annuities provide secure income, giving people peace of mind to spend what they receive without worrying if it will rise, fall or run dry during their lifetime. But there are no second chances when you buy an annuity – you must get it right first time. That means disclosing health and lifestyle information that could push the rate higher, then shopping around to find the most competitive deal. The better the deal, the more lifetime income you get.”
