Retirees waiting until later in life to buy annuities are most at risk of missing out on extra income by failing to shop around for the best deal.
Analysis of current rates by Just Group found that the gap between the best and worst annuity deals is much higher at age 75 than at age 70 or 65.
In cash terms, a healthy 75-year-old buying an annuity with a £50,000 pension could expect about £4,661 income each year for the rest of their life from the most competitive provider, compared to £3,980 from the least competitive - a difference of £681 or 17 per cent.
The chart shows the gap has been as high as 22 per cent in the past year.
At age 70 the best-worst difference is £492 or 14 per cent extra income a year, while at age 65 the difference is £342 or 11 per cent extra income per year.
Stephen Lowe, group communications director at retirement specialist at Just Group, said the figures highlight the importance of shopping around, particularly among older buyers who are at most risk of losing extra income with poor choices.
“Improving returns have pushed up demand for annuities in recent months but buyers must do their homework to avoid the poor value providers and to secure the highest income possible,” he said.
“It means extra money every month for as long as you live.”
Lowe explained that annuities provide secure income so people have peace of mind knowing that they can spend what they receive without worrying if it will fluctuate or disappear during their lifetime.
“But there are no second chances when you buy an annuity – you must get it right the first time,” he said.
“That means disclosing health and lifestyle information so that the rate offered is personalised to your circumstances, then taking that information into the open market to see which providers are the most competitive.
“The better the deal, the more income you will enjoy for the rest of your life.”
Bumper year
It comes as recent data by the Association of British Insurers revealed 2023 was a milestone year for annuity sales which totalled £5.2bn.
This is a 46 per cent increase on 2022 and the highest annual value since 2014 when pension freedoms were announced.
ABI said this record year included a bumper fourth quarter which saw £1.5bn in sales, off the back of a strong third quarter when sales totalled £1.4bn.
The number of annuity contracts sold also increased in 2023, to 72,200 ( up 34 per cent on 2022).
This is the largest number recorded since 75,000 were sold in 2016, reflecting strong consumer desire to lock in a guaranteed income for their later years.
Rob Yuille, head of long-term savings policy at ABI, said: “Securing a guaranteed income for life remains an important part of the mix of options for people to consider at and during retirement, and it’s great to see more people taking advantage of the protection they have to offer.
“It is also encouraging to see more people exploring the market to secure a higher income.
