Retirees failing to shop around for annuity deals are missing out on large chunks of income, according to Just Group.

Research by the organisation showed that a healthy 75-year-old man buying an annuity with a £50,000 pension could buy an annual income of £4,720 with the best provider; plumping for the least competitive deal would buy £4,070 a year – £650 less.

The stakes are highest for those buying annuities later in life. Aged 75, the gap between best and worst annuities was around £650 a year or 16 per cent, according to the analysis.

At 70, that gap was 15 per cent (£500 a year when buying an annuity with £50,000) and at 65 it was 13 per cent, a loss of £400 a year.

The news follows reports from the Financial Conduct Authority (FCA) that showed that 50 per cent of pension of savers who bought annuities in the four years up to mid-2022 did not compare deals from different providers.

Although annuity incomes have surged over the past two years, the group argued that the need to research the best deals is as acute as ever.

Just Group group communications director, Stephen Lowe, said: “Better rates are pushing up interest in annuities, but buyers must still do their homework in order to avoid the worst providers and secure the highest possible guaranteed income for life.”

Adding to this, Hargreaves Lansdown (HL) head of retirement analysis, Helen Morrissey, said: “It is vital that people compare quotes from across the market when getting an annuity. The difference between different providers can amount to hundreds of pounds per year and over the course of your retirement that can add up to a hefty sum.”

What’s more, matching an annuity to a retiree’s situation can make a significant difference.

“It is hugely important that you consider all options to make sure you get the annuity that best meets your circumstances,” said Morrissey. “For instance, if you are married you will likely need a joint, rather than single life annuity so your partner continues to receive an income when you die.”

Health data can also have an important impact, Morrissey added. “Inputting your health data into your application could see you get an enhanced annuity which could also add a significant amount to your income.”

HL’s data showed that at current rates a 65-year-old with a £100k pension could get up to £7,358 per year from an annuity, while a 65-year-old who smokes ten cigarettes a day could get over £8,000.

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