The average customer would need to receive an extra £500 a year in income before considering switching pension provider, according to analysis by Canada Life.

The research showed that £500 would be enough of a "tipping point" to encourage savers to shop around for an annuity, increasing slightly to £600 for customers who have a direct relationship with their pension provider.

In contrast, those who are already planning to shop around for their annuity are more likely to accept a lower price point to switch, with an average of £350 extra income a year deemed sufficient.

According to the research, around two-thirds of defined contribution members who haven't taken an income and intend to buy an annuity with at least some of their pension plan to seek advice from an adviser or shop around before purchasing an annuity.

In addition to this, however, a further 18 per cent said that they intend to set up their retirement income directly with their pension provider without the guidance of Pension Wise or the advice of a regulated financial adviser.

Commenting on the findings, Canada Life director of retirement income, Nick Flynn, said: “For those who choose to shop around for their annuity it can be easy to secure an extra £500 a year, or even more. Simply disclosing all lifestyle and medical information can lead to a welcome extra boost to your annual income which over time can add significant value.

"Over a typical retirement of 20 years, that extra £500 would equate to an extra £10,000 of additional income at no additional expense. Quite simply this is ‘free’ money.

“Remember, you can’t switch annuity provider once you’ve set up a plan, so getting the most value from your hard-earned savings up front is key. Never accept the first offer from your current pension provider, and do consider seeking help and advice.

“The recent Financial Conduct Authority (FCA) data references 20 firms were involved in the sale of over 60,000 annuities last year, and yet there are only five providers competing for business in the open market.

"Make sure you use the open market option to not only to get the best rate, but also ensure you consider the full range of benefit options available.”

The findings also follow previous research from the Pensions Policy Institute, which revealed that an estimated £130m may nave been lost in 2019 as a result of not shopping around for annuities.

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