Consumers failing to shop around for their annuity could be missing out on £765m of income collectively by 2035, research from Retirement Advantage has found.
The pension provider claimed over the course of a 20-year retirement, the average annuity holder could lose £8,460 of income simply because they did not get the best deal.
The calculation is based on the number of people who have bought an annuity since the pensions freedoms in April 2015, of which 50% (or 90,450 people) did not shop around, the provider said.
Retirement Advantage based its calculations on the average value of an annuity purchase (£55,700), and the difference between the average standard rate (£2,740 a year) and average enhanced rate (£3,163 a year), which equates to £423 a year, or £8,460 over a 20-year retirement.
The provider said people often did not think they qualified for an enhanced rate, which could be down to the questions asked. Getting advice, and ideally, a telephone interview with the annuity provider, could improve the annuity rate for a lot of people, it said.
Pensions technical director Andrew Tully (pictured) said: “Unfortunately the pension freedoms have given people a licence to lose money, as half of those buying an annuity fail to shop around and get the best deal – this situation has actually got worse since April 2015.”
He added: “We shouldn’t lose sight of the issue of poor value and the lack of shopping around also extends to the drawdown market. While drawdown is not a one off purchase like an annuity, it is still important people look around for the right product.”
Earlier this year, the Financial Conduct Authority (FCA) said it will require providers and advisers to flag to clients the best quote available on the open market before they commit to purchasing a guaranteed annuity.
The confirmation came almost a year after the regulator undertook research that proved carefully designed information prompts could have a significant impact on consumer behaviour and encourage shopping around.
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