"Not shopping around is tantamount to refusing ‘free money’ that could add up to thousands of pounds over the course of a long retirement."
Sales of annuities are surging but half could be missing out on extra guaranteed lifetime income by failing to shop around for the best deal.
The FCA's Financial Lives survey, released last week, shows that half (50%) of the pension savers who bought annuities in the four years up to mid-2022 did not compare deals from different providers.
The research also shows more than half (52%) did not know that people with health conditions could be offered higher incomes.
Analysis from Just Group found that for a 65-year-old annuity buyer in good health, the best providers are currently offering about 14% more income than the worst, although the difference has recently been as wide as 18%.
The difference means the best provider would pay £17,880 more income than the worst over a 20-year retirement assuming an annuity bought for £100,000. However, the difference could be higher once health and lifestyle factors are taken into account.
The FCA's survey also found that just 69% of people who have transferred a DB pension to a DC pension in the previous four years said they were satisfied with their choice.
One in ten with a DB pension said they considered a transfer – but only a third (36%) of these have spoken to a financial adviser.
Stephen Lowe, group communications director at retirement specialist Just Group, said: “Improving income rates are pushing up annuity sales sharply but far too many of those buyers are missing out. Not shopping around is tantamount to refusing ‘free money’ that could add up to thousands of pounds over the course of a long retirement.”
Brian Nimmo, head of redress solutions at OAC, commented: "Defined Benefit pensions offer huge security in retirement in providing certainty of income. There is a reason most DB schemes are now closed to new members – paying out such generous pension promises is hugely costly. Ultimately most people are likely to be better served by remaining within their DB pension scheme.
“In the work we do, we see first-hand the extent of the pension losses that many individuals have suffered through leaving the relative safety of their DB pension.
“Regulations around financial advice have been a focus for the FCA in recent years and it has tightened up its rules significantly which is a positive in establishing greater trust. Yet it is worrying that little over two-thirds of people who have completed a transfer in the last four years have said that they were satisfied with their decisions and that huge numbers are still considering it."
