The range of annuity rates offered by different providers widens significantly as people age, according to new data.
Analysis by retirement specialists Just Group found that the gap between the highest and lowest paying annuities was just 11 per cent for a 65-year old but this increased to 17 per cent for a 75 -year old.
At the age of 70 the differential between the best and worst paying providers was 14 per cent.
This means a healthy 75-year old buying an annuity with a £50,000 people would get an additional £4,661 a year for the rest of their life if they secured the higher rate on the market.
The average age at which people buy an annuity has increased since the introduction of Pension Freedom rules in 2015. Sales of annuities initially fell following the introduction of these rules, with a number of providers exiting the market, but demand has increased significantly over the last two years, with annuity rates rising on the back of higher interest rates and gilt yields. Last year annuity sales rose by 46 per cent.
Just Group communications director Stephen Lowe says these figures highlight the importance of shopping around, particularly among older buyers who are at most risk of losing extra income with poor choices.
“Improving returns have pushed up demand for annuities in recent months but buyers must do their homework to avoid the poor value providers and to secure the highest income possible,” he says.
Research carried out by the Financial Conduct Authority last year found half (50 percent) of annuity buyers did not compare rates to find the best provider and more than half (52 per cent) did not know disclosing poor health could result in higher rates.
Lowe adds: “These high numbers raise concerns about the level of support retirees are receiving – this is the closest thing in the financial world to being given ‘free money’.
“Annuities provide secure income so people have peace of mind knowing that they can spend what they receive without worrying if it will fluctuate or disappear during their lifetime But there are no second chances when you buy annuity – you must get it right first time. That means disclosing health and lifestyle information so that the rate offered is personalised to your circumstances, then taking that information into the open market to see which providers are the most competitive.”
