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Savers return to annuities in wake of market volatility

Savers return to annuities in wake of market volatility - Retirement Line.

Savers are gradually reverting back to the ‘safe haven’ of annuities according to eValue’s latest quarterly Pensions Freedom index*. 

The data sample of 17,000 people revealed:

  • In October preference for guaranteed income rose to 47%, up from circa. 33% in April
  • Preference for flexible income dropped from 54% in April to 42% in October

The figures demonstrate that the market volatility in late August and September may have had a big influence on the relative attractiveness of a guaranteed income; driving the appeal of annuities to their highest point since the arrival of pension freedoms.

It is predicted that if the current market uncertainty persists, there may be another peak in the popularity of guaranteed income when freedom and choice reaches its first anniversary in April.

The findings come soon after a report – published at the end of last month by the Pension and Lifetime Savings Association  revealed savers are not rushing to unlock the cash in their pension funds. The report suggested the next wave of retirees will be more inclined to buy annuities because they are more defined contribution (DC) pension-reliant, will have less pension wealth and will be less likely to want to take risks. 

The report also revealed that the majority of the 2.8 million savers with DC pension wealth eligible to take advantage of Pension Freedoms have not yet taken action; so annuities could see further increases very soon as eligible savers come to make their decisions.

Why does an annuity carry less risk?

Many people rely on the financial security of a fixed monthly income, particularly if wanting to maintain a certain lifestyle in retirement that relies on a guaranteed income each month. 

Once a person has purchased their annuity, they have the guarantee they will receive their retirement income for the rest of their life, either as a level payment or increasing in line with inflation, regardless of what happens to the market or how long they live for. 

With an annuity, if you continue to live for forty years after retirement, you would continue to receive your guaranteed monthly income even if you have reached and surpassed the original value of your fund. 

Approaching retirement? 

A retirement income specialist like Retirement Line will be able to explain all the options available to you, in a jargon-free way that you can understand. There is no obligation to proceed by talking to us, and you will never be under any pressure to make a decision.

To speak to one of our specialists today, or to request your free guide, call 0800 652 1316.

*eValue communicates investment risk to consumers through state-of-the-art financial planning solutions 

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