One in eight prospective annuity buyers are unwilling to shop around, despite the prospect of higher retirement income, new research from Canada Life has revealed.
The research explores the reasons why pension savers will not shop around before buying an annuity and the factors that would make them more likely to switch provider.
It follows data from the Association of British Insurers which showed that 31% of annuity customers purchased their product from their existing pension provider in 2024.
Canada Life said the primary reason people are unwilling to shop around for an annuity is trust in their incumbent pension provider (40%). Nearly a third (32%) cited a good relationship with their existing pension provider and 24% called out good customer service.
Nearly a quarter (23%) of individuals also admitted they wouldn’t know where to start when it comes to switching and 15% said they lack the confidence to switch.
However, beyond the possibility of higher income, the top three factors that would encourage potential annuity customers to switch from their existing provider were lower fees (42%), if the provider had a strong reputation for financial stability and security (34%), and if the individual had concerns about their current provider (32%), Canada Life said.
In addition, one in three (30%) people would consider switching if the benefits or features on offer were better. Among these, the top three preferred benefits that would motivate customers to switch are the flexibility to choose a guaranteed or inflation-linked income (61%), the ability for your spouse to receive your annuity payments after you die (54%), and flexibility in withdrawals or making changes to your policy (53%).
Nick Flynn, retirement income director at Canada Life, said the recent rise in annuity rates means pension savers should explore their options and take advantage of competitive rates available.
He said: “Whilst having a trusted relationship with a pension provider is beneficial, it should not deter people from shopping around for the best rate available. It is concerning that our research found that one in eight individuals would not consider switching provider, irrespective of potential retirement income gains.
“Most people wouldn’t think twice about shopping around for a better deal on their insurance or broadband; the same logic applies when it comes to an annuity. However, an annuity is for life, not just one year. So, it’s critical to get the best deal.”
Flynn said certain annuities come with added benefits that could suit individuals better, for example, some annuities provide flexibility in being able to make changes to the policy, while others will continue to pay a regular income to a loved one after the annuitant dies.
“Purchasing an annuity is a significant financial step and an irreversible decision, so it’s understandable that some people lack confidence or don’t know where to start,” Flynn added.
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