The pension reforms may have seemingly heralded the end of the road for annuities – and rates certainly dropped quickly in response – but it seems that consumers still crave the security that annuities can bring, with research from Retirement Advantage finding that demand for a guaranteed income throughout retirement is as strong as ever.
According to their Retirement Sentiment Index report, "certainty" ranked as the top priority for 43% of over-50s surveyed when asked to think about income in retirement, followed closely by flexibility (33%). Being able to grow income or having instant access to funds – things that could be more easily achieved with a drawdown or full cash withdrawal arrangement – ranked far lower as priorities, with only 10% and 14% respectively saying these were their top priority.
Having a guaranteed income stream clearly outranks all other financial considerations when it comes to retirement, and considering how long retirements can be these days, and how much people think they'll need (the average respondent felt that they'd need around £1,487 in monthly household income), it's no wonder that so many consumers want the security of knowing they won't run out of money in their later years.
In fact, the over-50s surveyed are anticipating a 17-year retirement (they're expecting to retire at 65 and live to 82), and with financial concerns still prevalent throughout this time, having a suitable income is key. For example, the most important aspects for retirement finance are the ability to pay bills (67%), go on holidays (60%), start new hobbies (38%) and pay for long term care requirements (24%), and considering that some of these are necessities as opposed to luxuries, it's understandable that today's future-retirees are concentrating on securing a guaranteed income.
While some will be relying on their earnings through paid work to help – 47% expect to work part-time and 5% don't expect to ever stop full-time work – others will need additional sources of income, and the only way to have that income guaranteed is to opt for an annuity.
Andrew Tully, pensions technical director at Retirement Advantage, commented on the findings: "We asked people straight out what they would value most from their retirement savings, and certainty is their top priority. April's reforms were supposed to herald the beginning of the end for annuities, with freedom the new order of the day. While the reforms put a lot more options on the menu for retirees, guaranteed income is still the most popular dish.
"It's difficult enough to plan for a year in the future, let alone plan effectively on day one for potentially decades of retirement. People want to know they will be able to cover life's essentials and still have the flexibility to enjoy life and deal with the unexpected. Flexibility and freedom of choice are important, but certainty is still what most people want most of the time."
If you still want the guaranteed income that only an annuity can bring, consult our no-obligation annuity service to find out more.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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