John Wilkinson, Nationwide’s head of protection and investments, said: "In any walk of life, knowledge is key and the same applies to annuities. Many people think they have to buy their annuity from their pension provider, and indeed many take that route. Purely by shopping around, people could have an extra 20 per cent retirement income. That really adds up over a 20 to 25 year period.

"We wholeheartedly welcome the FSA’s investigation into the annuity market as, all too often, there are pensioners who are being short-changed and unable to enjoy the comfortable retirement they deserve.

"This issue really needs to be tackled more widely. It is vital that the whole industry plays a part in ensuring pensioners get the best deal they can."