Co-sponsored by Retirement Line and Canada Life, the Pensions Policy Institute (PPI) recently published their independent research titled “Shopping around for annuities: the changing market” which reviewed the current annuity market. Within the published briefing note, they discussed the topic of ‘survival pessimism’ saying:
“There is a tendency for people reaching retirement to underestimate their longevity. This is often because people think in terms of their parents’ or grandparents’ lives rather than their peers. This ‘survival pessimism’ could see people making decisions that mean they lose out on the benefits of an income for life.
‘Survival pessimism’ could also explain why some people are less likely to ‘shop around’, as they may not think that they would accrue any significant benefit from doing so.
Over the last 40 years, life expectancy at age 65 has increased by almost six years for men and five years for women, and while actuarial valuations will take account of this, it not only means that people could benefit for longer from a reliable income, but also that those who withdraw large sums at retirement will have to make their remaining pension pot last longer. It may be that the use of more objective assessments of longevity could encourage people to ‘shop around’ more.”
“A lifetime annuity is currently the only pension income product which guarantees to pay a secure level of income for life. It is also worth noting that loved ones can also be included within an annuity policy along with additional death benefits, which could result in annuity payments continuing to be made after the policyholder’s death.
When looking at any pension income product, it is important to weigh up both the potential pros and cons. What a lifetime annuity might lack in flexibility, it potentially gains in longevity risk. With income drawdown, many individuals may have to try and manage their pension income over the course of their retirement. Whereas, with an annuity, the annuity provider takes on the longevity risk, providing peace of mind to individuals throughout retirement and especially, in later-life (aged 80+).”
A copy of the research in full can be found here.
Retirement Line are the UK’s number 1 pension income intermediary* and ranked number 1 in Trustpilot’s Pension Fund Category. You can contact one of Retirement Line’s friendly annuity experts on 01733 307202.
*Equifax Touchstone pension income and annuity sales figures 2018 to 2020