One in eight (12 per cent) people intending to purchase an annuity would not consider switching from their existing pension provider to another supplier, even if they could potentially gain additional retirement income, research from Canada Life has revealed.

The research revealed that the main reason people are unwilling to shop around for an annuity regardless of potential additional income is trust in their incumbent pension provider (40 per cent).

Indeed, nearly a third (32 per cent) stated that they have a good relationship with their existing pension provider, while a quarter (24 per cent) called out good customer service from their incumbent.

Complexity also remained a concern, as nearly a quarter (23 per cent) of individuals said they wouldn’t know where to start when it comes to switching, up 9 percentage points since 2021, when Canada Life conducted similar research, while almost a sixth (15 per cent) said they lack the confidence to switch, up from 6 per cent in 2021.

This comes after recent data from the Association of British Insurers revealed that almost a third (31 per cent) of annuity customers purchased their product from their existing pensions provider in 2024.

There were factors that could tempt savers away however, as Canada Life found that 42 per cent of potential annuity customers said that lower fees could encourage them to switch from their existing pension provider.

In addition to this, 34 per cent would be tempted if the provider had a strong reputation for financial stability and security, and 32 per cent would consider moving if they had concerns about their current provider.

A further 30 per cent also said they 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 per cent), the ability for your spouse to receive your annuity payments after you die (54 per cent), and flexibility in withdrawals or making changes to your policy (53 per cent).

Commenting on the findings, Canada Life retirement income director, Nick Flynn, said: "In January we saw a dramatic increase in gilt yields, which spelt good news for annuity rates.

"While the market has since stabilised somewhat, it remains an ideal time for customers considering an annuity to explore their options and take advantage of the competitive rates available.

"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 also emphasised that whilst ‘free money’ is an "obvious plus", certain annuities come with added benefits that could suit savers better as well, such as providing flexibility in being able to make changes to the policy.

“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. We always recommend speaking to a financial adviser or annuity broker who can help you understand the choices available," he stated.

"At a minimum, independent research or guidance from sources such as Pension Wise is essential in helping you understand your options and the steps you can take to find the right annuity product for you.”

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