The latest figures from the MGM Advantage Annuity Index reveal that in the last three months, annuity rates have fallen by 3.65 per cent and enhanced annuity rates by 3.04 per cent. Over a year, the figures are 6.98 per cent and 5.32 per cent respectively.
MGM Advantage's figures also show that the difference between the best and worst quotes on offer has widened – the difference is 36.83 per cent for men and 37.22 per cent for women, up from 35.60% and 34.70% in June. George Ladds, head of pension and investment research at Fair Investment Company explains why these figures mean it is more important than ever to shop around for the best deal.
"The thing that strikes me most about this research is the fact that the gulf between the best and worst rates is continuing to grow which means the difference between the highest and lowest quote on the exact same pension pot could run into thousands of pounds," he said.
"This really emphasises the importance of using the Open Market Option - everyone should be shopping around first to find the best quote before buying an annuity to ensure they are getting the best rate.
"Yes, the fact that rates are falling is yet more bad news for those coming up to retirement age, but unfortunately, it is inevitable – we are living longer so annuity rates are going to go down – and although there may be nothing we can do to make annuity rates go up, we can make sure we are getting the best possible rates available."
MGM Advantage's research also found that the difference between an average standard annuity and an average enhanced annuity is 24% which, over an average retirement on a pension pot of £50,000 is £12,490.58 for men and £14,101.80 for women.
"Just by declaring health and lifestyle issues you could get much higher annuity rates – many people are either not aware or don't think it will make much of a difference, but these figures prove that enhanced annuities really can enhance retirement income," explains George.
"It is estimated that around 40 per cent of people are eligible, but currently, enhanced annuities only make up around 10 per cent of the annuity market, this means that there are potentially thousands of pensioners losing out on thousands of pounds in retirement income."
George says he fears many people are missing out simply because they wrongly believe that using the Open Market Option is a complicated and stressful process.
"Unfortunately, there is a common misconception that comparing annuities and switching providers is complicated – it's not," he said.
"By using a no obligation annuity comparison service like ours, annuitants could increase their retirement income by as much as 30%. Our message is simple – don't just settle for the first quote, shop around and see how much more you could get."