With increased interest rates continuing to drive the highest demand for annuities in recent years, Legal & General has warned that shopping around before you decide could make a massive difference in how much you earn over the course of your retirement.

New analysis shows that a 66-year-old with a £100,000 pension pot can now purchase an annuity that pays an annual income of £7,000 – an increase of £174 when compared to the same time last year. Demand is also up, with annuity quote enquiries increasing by almost three quarters (71%) compared to the same time last year.

Looking beyond rates, this increase in enquiries could also be as a result of people seeking the security an annuity can offer amid a continuously difficult economic backdrop.

But Annuity Ready data reveals a 3.6% difference in top and bottom annuity rates currently available on the market. That’s a difference of £254 in potential annual income or £5,945 over the course of the average retirement.

Lorna Shah, the company’s Managing Director of Retail Retirement, said: “While securing the best rate is important, rates aren’t the only value annuities can offer.

“Annuities can be a good option for people who want peace of mind and the assurance that comes with the security of having a guaranteed income for the rest of their life. Whilst record rates should only form part of a wider discussion for people considering purchasing an annuity, our data highlights that the rate can have a very real impact on people’s annuitised income, so it’s always worth shopping around.

“If you are thinking about purchasing an annuity, it’s important to consider all your options carefully. Make sure you’ve had all the advice and guidance you need before deciding what the right choice is for you.

“Alternatively, you can also consult a financial adviser to explore rates and your available options.”