Retirees who delay purchasing annuities are at greater risk of losing out on extra income if they don’t shop around; selecting a more competitive annuity provider can lead to thousands of pounds in additional income during a long retirement, according to Just Group.
Research indicates that the gap between the best and worst annuity deals is notably higher at age 75 compared to age 65, emphasising the importance of shopping around at all ages, with older buyers facing increased risk, particularly when the gap at age 75 has reached 22 per cent in recent times.
According to Just Group, when purchasing an annuity with a pension of £50,000, a 75-year-old in good health may anticipate getting about £4,720 annually from the most competitive provider against £4,070 yearly from the least competitive provider, a difference of £650 (16 per cent) each year. The best-worst difference is £500 a year at age 70 and £400 at age 65.
Just Group group communications director Stephen Lowe says: “Better rates are pushing up interest in annuities but buyers must still do their homework in order to avoid the worst providers and secure the highest possible guaranteed income for life.”
Lowe says: “The certainty of annuity income makes it relatively more attractive with age as people seek to reduce the risk of outliving their assets,” said Stephen Lowe. “For those who can afford to, deferring annuitisation or buying annuities in tranches can work well.
“But it still depends on getting the best deal when you do decide to buy and not just accepting the first offer. That means disclosing health and lifestyle information to get a personalised rate. 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.”
Lowe adds: “It’s quite shocking that the FCA found half of annuity buyers did not compare rates to find the best provider – it’s the closest thing in the financial world to being given ‘free money’ and it raises concerns about the level of support retirees are receiving. There are no second chances when you buy an annuity. It’s important to do it right first time.”
He advises all retirees to use the government-sponsored Pension Wise service’s free, impartial, and independent advice. Professional annuity brokers or financial advisors can assist with option selection and supplier comparison.
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