Failing to shop around for the most competitive guaranteed annuity deals could cost retirees an extra 16% of income, research from Just Group revealed.
According to the analysis, a 65 year old in good health using £50,000 of pension to purchase a standard Guaranteed Income for Life solution (GIfL) could generate £3,378 a year income from the best deal. In comparison, opting for the worst-paying annuity would result in annual income of £2,900. The difference equates to around £12,000 extra income over a 25-year period.
Just Group said the gap between the worst and best deals on standard annuities has widened to more than 16% in recent months, its highest for four years.
Stephen Lowe, group communications director at Just Group, said that rising returns had driven interest in guaranteed retirement solutions, but its analysis serves as a reminder to shop around.
“It’s a competitive market and the chances of your own provider offering the best deal are small,” he explained. This is a case where being loyal can cost you lost income for the rest of your life.”
With annuity providers regularly repricing their GIfL rates depending on events in the financial markets, retirees should do a comparison at the point of accessing a pension, says Just Group.
Lowe said: “Nearly 70,000 annuities were bought by retirees in 2021-22 with an average value of about £75,000. This is one of the biggest financial decisions a retiree will make and one that can’t be undone so it’s important to fully understand the options and not rush.
“It’s important to disclose health and lifestyle information which allows providers to generate personalised rates which could be higher – sometimes significantly higher – than the ‘standard’ rates published in the newspapers and online which are usually based on people in good health. Finally, remember that what sounds like a small difference can add up to large sums over the course of a long retirement.”
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