A growing number of retirees are choosing certainty over their new pension freedoms and opting to buy an annuity at retirement, according to figures from Retirement Line.
The annuity specialist, which arranges pension annuities for the UK’s over-55s, has reported a 45% year-on-year increase in sales between the end of September 2015 to the end of September 2016.
An annuity is still the only way for over-55s to guarantee an income will be paid to them for the rest of their life, whatever happens to rates or however long they go on to live for.
Likewise, Just Retirement, one of the pension providers whose products are available through Retirement Line, released data revealing their own annuity sales were up 17% to nearly £400million in the first six months of 2016.
The sales increases come almost 18 months after the former chancellor George Osborne overhauled the pensions industry by giving over-55s the freedom to access their pension fund in any way they choose – even taking the entire amount as cash if they want to.
Despite the initial annuity sales slump following the announcement and introduction of the reforms a year later, while prospective retirees considered their new options, Retirement Line reported sales increased by 81% in the first half of 2016 (year-on-year), as retirees quickly returned to the safe haven of a guaranteed income for life.
David Slater, CEO of Retirement Line, explained that while some aspects of the pension freedoms will remain attractive to many people approaching retirement, the majority tend to prefer less risk as they grow older.
“The pension freedoms brought with them the opportunity for a number of retirees with financial issues to access the cash that they needed straight away. Now that the rush to access those funds has passed, demand for traditional annuities is returning.
“For the risk averse, when it comes to their retirement income, the certainty of a guaranteed income for life which is exclusively offered by annuities, will always be key for many people in and approaching retirement.”
Rodney Cook, CEO of Just Retirement, said:
“The fundamental point is that an annuity is exactly the right product for the majority of people who come in for retirement. I think we have seen a real settling down in the market.”
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Retirement Line work on a non-advised basis. If you are at all unsure of which options suit you, you should seek regulated advice.
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