The Financial Services Authority (FSA) recently announced it is to conduct a 'thematic' review into the way annuity products are sold to ensure consumers are receiving the correct level of encouragement to 'shop around' for the best deal.
The regulator had previously expressed concerns at the effects of consumers failing to shop around, particularly with average annuity incomes dropping dramatically.
The National Association of Pension Funds (NAPF) also claimed that consumers could be losing out on up to £1 billion in pension income as a result of not researching the market thoroughly.
In a statement, the FSA said: "We want to understand the level of the potential detriment for consumers if they do not shop around to see if there are ways to make this market work better for consumers."
Research by Investment Life & Pensions Moneyfacts found the most competitive annual annuity income, based on a £50,000 pension pot for a standard level annuity without guarantee for a 65-year-old, currently stands at £2,841. In comparison, the least competitive stands at £2,444, reflecting a £355 difference.
Richard Eagling, head of pensions at Moneyfacts, said: "The extent of the detriment that consumers may face as a result of not shopping around when purchasing an annuity may surprise many who automatically assume that the difference may be negligible on the basis that the underlying product is the same."
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