Better annuity rates on way for thousands

Higher retirement income will be on the way for thousands of pension holders from next month, when insurers are forced to highlight the potential gains of shopping around before buying an annuity.

From September 1, new rules will insist pension providers remind customers on at least two occasions in the four months before their intended retirement date, that they can improve their pension income by hundreds of pounds a year if they check the annuity rates on offer from rival firms.

They should also receive a copy of the factsheet "Your pension - it's time to choose" from City regulator the FSA.

Annuities provide an annual income until death and all pensioners must buy one before their 75th birthday. But rates can vary widely. The government believes only a handful of people have taken the opportunity to use the "open market option" that allows them to shop around.

Figures from adviser the Annuity Bureau (www.annuity-bureau.co.uk) show a man retiring aged 65 with a pension pot worth £100,000 can buy an annuity income of £8,141 from the Prudential compared with £7,705 from Allied Dunbar.