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A Differential does not update the existing backup. A Differential creates a new backup of your data at that point in time, but stores it in such a way that the backup file itself only needs to store the changes that have occurred with your data relative to the pre-existing Full. So for example if you backed up your original data in a Full, then created a brand new 50 MB file at your source, and then made a Differential, the Differential would only have to store that new 50 MB file. But if you were ever to browse or restore that Differential, you'd still get all of your data since the Differential is aware that the point in time "data state" it is meant to represent also includes all of the data from the Full.
So a Differential will indeed typically take less time and result in a smaller backup than running another Full, but the resulting Differential will also be dependent on that existing Full. That means you wouldn't be able to delete the earlier Full without rendering the Differential useless, and it also means that if the Full ever becomes corrupted or partially unreadable (possibly due to an issue with the underlying storage device), then the Differential that depends on it would be useless as well.
If your data truly changes so infrequently that performing only annual backups is feasible, that's perfectly fine, but as a general practice I'd recommend having at least two Full backups at any given time in order to mitigate the corruption/unreadability risk. Storing Fulls across multiple devices is even better.