People who do not shop around for annuities are missing out on £130m of income, a new report has suggested.
The report, from the Pensions Policy Institute for LV, says that although only 80,000 people purchased annuities last year, many of them would have got a better deal if they had shopped around.
It calculated 30,000 could have got a better deal, leaving them on average £4,000 better off each, or £130m in total.
“It is important that industry and those providing guidance and support continue to work on helping people to understand the benefits of shopping around for the best annuity rate. Though fewer people are purchasing annuities than before, they still form a significant element of people’s retirement income,” the report said.
The report was based partly on FCA estimates from before pension freedoms were introduced that suggested 80 per cent of those purchasing annuities could have increased their retirement income through shopping around, by an average of 6.8 per cent.
Annuity quotes sourced today showed the difference between the highest and lowest quote for an individual could vary by up to 40 per cent, the report said.
John Perks, managing director of life and pensions at LV, said: “Last year alone consumers missed out on a staggering £130m over their retirement by sticking with the same provider when taking out an annuity.
"This is echoed across the retirement space with consumers failing to access the best retirement products. People are expecting their pension pot to stretch even further nowadays so it’s crucial they take control and get support to help them get the most from their savings.
“Government has a vital role to play in encouraging people to take advice and therefore we are urging it to maintain momentum on the financial advice reforms to ensure retirees can get the right retirement solutions for their needs.”
LV also published research showing people are increasingly expecting their retirement income to cover more than just the essentials.
Nearly six in 10 of those planning to retire in the next five years want their retirement income to also cover home maintenance costs, while 53 per cent want it to cover holidays and a quarter say they’d like to leave money behind as an inheritance.