There are "massive" differences between different pension plans and annuities and as such consumers should shop around, according to Informed Choice.

Martin Bamford, joint managing director of the firm, suggests that it is "absolutely essential" for individuals to look around for the best deal they can get.

He notes that everybody has the right to exercise the open market but that few people actually take advantage of this fact.

Mr Bamford states that since a few years ago, insurance firms now have to point out the open market option when they send people a retirement pack.

"Yet people seem reasonably content just accepting the annuity rate that's on offer from their existing provider," he finishes.

This is Money notes that by the end of 2007, more than 350,000 people will have swapped their pension fund for a lifetime income in the form of an annuity.

Informed Choice is a wealth management service provider.