The gap between the best and worst paying annuities has spiked, following a rise in bond yields, Just Group has revealed.
Its analysis found that an annuity buyer aged 70 would secure nearly 20% more income by choosing the best deal over the worst, adding up to £7,400 more income every 10 years from a £50,000 pension fund. The gap at age 65 is 13%, equal to £4,380 more income over 10 years from a £50,000 pension pot.
Although the gap has been trending higher for more than a year, it has reached its peak in recent weeks.
Stephen Lowe, group communications director at Just Group, said it was likely that providers of Guaranteed Income for Life (GIfL) solutions were responding to movements in market rates.
He explained: “GIfL pricing is influenced by the returns on gilts and bonds which have been moving up recently. It’s a competitive market and annuity providers will be watching the changes, with some responding more quickly than others depending on commercial considerations.”
Lowe said the findings highlight the need for retirees to shop around before purchasing an annuity.
“Current annuity rates are attracting a lot of interest from retirees wanting guaranteed income but it is unlikely your own provider will pay the most. Avoiding inferior rates requires disclosing health and lifestyle information that could push the rate higher and then shopping around for the best deal,” he added.
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