Pensioners are missing out on £17,000 in ‘free money’

Pension savers have been urged to shop around when looking at annuities (Image: GETTY) Thousands of pension planners could be missing out on £17,000 in ‘free money’ as they do not understand how annuities work and are not shopping around to get the best deal. Researchers found that for a 65-year-old in good health buying an £100,000 annuity, the difference between the worst deal and the best deal is £17,880 over a 20-year retirement. The current best deals offer 14 percent more income than the worst, and the difference has been as wide as 18 percent recently. Stephen Lowe, group communications director at 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.’ Pension savers have been urged to shop around when looking at annuities (Image: Getty) ‌Results from a survey by the Financial Conduct Authority released last week show that half of pension savers who bought annuities in the four years to mid-2022 did not compare different deals. More than half did not know that people with health conditions can get higher incomes. Mr Lowe said: ‘Don’t accept your own pension provider’s offer because there are other companies likely to offer you more. ‘You have to take your time to make sure you understand the options, then follow the two golden rules. Pension savers have been urged to shop around when looking at annuities (Image: GETTY) ‘First, you must disclose health and lifestyle information so the annuity you are offered is personalised to you and not just a standard rate. Then second, use that information to shop around all the providers for the best rate.’ He encouraged those looking at drawing down from their pension to book an appointment with the free Pension Wise service, to understand their options. Karen Barrett, from Unbiased.co.uk, previously told Express.co.uk a person can get up to 40 percent more income through an annuity , if they have a relevant health condition. ‌ She said: ‘You also don’t have to buy an annuity with your entire pot. You could use some of your fund to buy an annuity now, and place the remainder in income drawdown. ‘This leaves you the option to buy further annuities in the future should you want to – perhaps at a point when rates have improved.’ She said one option for retirement planners is a fixed-term annuity, such as one that lasts from one to 25 years. In this case, the person receives the fixed income over the period and then a lump sum when it matures. For the latest personal finance news, follow us on Twitter at @ExpressMoney_.