Pensioners in their 70s could be missing out on hundreds of pounds a year in retirement income, new figures suggest, with the biggest losses falling on those who make decisions later in life.
The impact can add up to thousands of pounds over the course of retirement, making timing and choices increasingly important as people age.
Analysis from retirement specialist Just Group shows that people who secure an annuity in their mid-seventies face the largest income gap between the best and worst deals available. The research found that this gap widens sharply with age.
At 65, the difference between the highest and lowest rates is around 10 per cent.
By the age of 75, that gap grows to nearly 18 per cent, meaning some pensioners could lose around £717 a year, or many thousands of pounds over their retirement, depending on the option they end up with.
The findings underscore how crucial it is for those approaching later retirement to actively seek out the best available deal rather than simply accepting their existing provider’s terms.
In concrete terms, a healthy 75-year-old converting a £50,000 pension pot into guaranteed lifetime income could secure approximately £4,780 annually from the best-paying provider.
The same individual would receive just £4,063 from the least competitive firm, representing an annual shortfall of £717.
Just Group’s analysis indicates this gap has reached as high as 22 per cent in recent months.
For those retiring at 70, the annual difference between best and worst rates amounts to £564, equating to 15 per cent additional income.
Pension warning as retirees face £717 a year hit in later retirement
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GETTYYounger retirees at 65 face a smaller but still significant variation of £355 per year, or 10 per cent.
These disparities accumulate substantially over a lengthy retirement, potentially costing those who fail to shop around many thousands of pounds in lost income.
David Cooper, director at Just Group, said: “Shopping around for the best deal is important at all ages but becomes increasingly important for those buying later in life because of the huge gap between the best and worst rates available.”
He noted that interest in guaranteed income products has grown considerably over recent years as annuity rates have improved.
Annuity purchasers have no opportunity to revisit their decision once made, making the initial choice critical
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GETTYHowever, Mr Cooper emphasised that only those willing to compare offerings across different providers and switch away from their existing pension company will fully benefit from these improved conditions.
“Demand for Guaranteed Income for Life solutions has risen sharply for the last few years as annuity rates have improved, but only those comparing between providers and being prepared to switch will reap the full benefits,” he added.
Mr Cooper stressed that annuity purchasers have no opportunity to revisit their decision once made, making the initial choice critical.
“That means disclosing health and lifestyle information so that the rate offered is personalised to your circumstances, then taking that information into the open market to see which providers are the most competitive,” he said.
Those with medical conditions or lifestyle factors such as smoking may qualify for enhanced rates
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GETTY“The better the deal, the more income you will enjoy for the rest of your life.”
Those with medical conditions or lifestyle factors such as smoking may qualify for enhanced rates, making full disclosure essential when obtaining quotes.
Mr Cooper recommends that all retirees access the free, impartial guidance available through the government-backed Pension Wise service before making any decisions.
Professional annuity brokers and financial advisers can also assist in comparing options across the market.