The gap between the best and worst Guaranteed Income for Life rates has widened to a four-year high, research from Just Group has shown, revealing the need for thorough research when recommending annuities.
According to the findings, retirees buying Guaranteed Income for Life last month could have generated 16% more income by choosing the best-paying plan over the worst.
Comparisons show that the worst paying standard GifL plan would generate £3,137 income a year on a £50,000 purchase price for a 65 year old retiree in good health, while the best paying would generate £3,642 per year. Over 25 years, this amounted to £12,625.
Just Group said that with GifL growing in popularity, with nearly 70,000 plans sold in 2021/22, buyers need to be careful to avoid the ‘loyalty trap’.
Stephen Lowe, group communications director at Just Group, said: “Annuity providers are competing for business so it’s likely you’ll get a better deal by shopping around – being blindly loyal may well cost you a smaller income for the rest of your life.
“The gap between the worst and best fluctuates typically between 5% and 10% but recently it has touched 16% which is the highest we’ve seen for nearly four years. On a £50,000 pension, that represents more than £500 a year extra income each year for the rest of their life.”
Lowe said that while many retirees are tempted to take “the path of least resistance” and opt for whatever their pension provider is offering, it could prove to be a costly mistake.
Lowe added: ““Retirement is quite a financially complex time of life, so think about using an adviser or a specialist annuity broker who can formulate a plan based on your personal circumstances and who can scour the market for the best solutions and deals.
“Make sure you get a chance to fully disclose details about your lifestyle and medical history. This allows providers to generate personalised rates which will 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, don’t settle for less. Don’t just shop around but be prepared to switch too – even small differences in rates can add up to large sums over the course of a long retirement.”
