Annuities on course for ‘best sales in a decade’

02 September 2024

Written by Retirement Line

The Association of British Insurers (ABI) has reported that UK consumers put £3.6 billion of their pension savings into annuities in the first half of 2024. This represents a rise of more than 50 per cent on the same period last year.

According to a 16 August Financial Times (FT) article, Legal & General has already taken in £1.2bn in annuity sales in the first half of 2024 after a record year in 2023. The company’s Group Chief Executive Officer António Simões says that “more and more” people were choosing to buy an annuity with some of their pension savings. 

An annuity provides guaranteed income from your pension savings, either for life or a fixed term, with no investment risk. Consumers sometimes take an annuity alongside other options such as income drawdown, where the individual’s pension savings remain invested and can be accessed regularly or on an ad-hoc basis.

Demand fuelled by higher annuity rates and new financial rules

In the FT article, Insurance Correspondent Ian Smith pointed to higher interest rates as one of the drivers behind the popularity of annuities so far this year. 

Annuity rates are linked to government gilt yields, which typically rise when interest rates rise. As the Bank of England has put up interest rates several times in the past two years or so, annuity rates have followed suit. The higher the annuity rate you secure, the more income you will receive from your chosen annuity provider. 

The article also mentioned the effect that new financial rules are having on annuity sales. The ‘consumer duty’ regulations mean that financial advisers must demonstrate they are considering the best outcomes for customers. Advisers may therefore be more likely to promote annuities to their clients, especially given the increase in annuity rates seen in the past couple of years.

As for the future of annuities, the FT article says that Aviva Managing Director Amanda Blanc believes the annuity market is likely to continue growing. She says: “Whilst interest rates will probably come down, they probably won’t come down to where they were before.”

Retirement Line’s Mark Ormston is also optimistic about the outlook for annuities. He says: “It’s no secret there has been a substantial increase in demand for annuities in recent years. High Bank Rates have seen annuity rates rise to the highest they have been for over a decade. 

“This is coupled with the fact that more people are reaching pension income age with defined contribution pension savings thanks in part to auto-enrolment, and many are looking to secure some level of guaranteed income through an annuity.” 

For these reasons and the general policy direction in the UK, Mark believes the annuity market is going to remain buoyant for some time.

Talk to Retirement Line about your annuity options 

If you are considering turning your pension savings into an annuity for guaranteed lifetime retirement income, our friendly annuity specialists are here to help. They will explain your options and explore how much guaranteed income you could achieve from your pension fund. They can also tell you if you qualify for more income with an enhanced annuity on account of adverse health issues or lifestyle choices such as smoking, which could reduce your life expectancy. 

You can speak to a member of our team today by calling freephone 0800 652 1316 or request a call back. Alternatively, use our free annuity calculator for an instant estimate of how much annuity income you might expect to achieve.

Source:

UK annuities on track for best sales in a decade. Financial Times. Accessed 16 August 2024.