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Annuity sales down – but demand could change it

Annuity sales down – but demand could change it

Category: Annuities

Updated: 22/10/2015
First Published: 22/10/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Do you want a guaranteed income in retirement? The definitive answer could well depend on how old you are, with research from eValue showing that the younger generation is leaning far more towards guaranteed income than those closer to retirement – which means that, despite annuity sales falling further in recent months, demand for them could spring back in the years to come.

Rising demand

The figures, taken from the latest Pensions Freedoms Index, show that 10% of people are now more likely to seek a guaranteed income than they were in the immediate aftermath of the pension reforms – 43% are now exploring a guaranteed income post-retirement, compared with just 33% in April. Conversely, demand for flexible income (or income drawdown) has reduced from 54% to 44% over the same period, meaning that the 21% gap in preference has fallen to just 1% in six months. Preference for withdrawing cash remains unchanged at 13%.

This reduced appetite for pure drawdown is largely unexpected, and there are signs that the trend could continue – despite the announcement that sales of annuities have fallen by almost 90% since April, eValue's data indicates that the landscape of pensions could change in the future, with so-called millennials planning to revert back to guaranteed income in retirement.

The survey found that 55% of those in their 20s wanted to understand what may be available in terms of a guaranteed pension income, compared with 29% of those in their 60s. Similarly, the younger age group are least keen on cash withdrawals with just 7% registering interest, a figure that more than doubles among 60-year-olds (16%).

These findings may be due to the fact that younger generations are far less likely to have any form of defined benefit contribution, the report noted, and millennials are more uncertain about their future earnings in general, which could explain the growing preference for a guaranteed form of income in later life.

Realising the benefits

It seems that a growing number of people are realising the benefits of annuities – namely the fact that income will be guaranteed for the rest of an individual's life, something that can't be said for any other form of later life income. Annuity rates and retirement incomes may be falling, but when today's millenials reach retirement age there could well be a resurgence, particularly if demand continues to rise.

And, if you're already approaching retirement age, it could still be worth considering an annuity as an option. Consult our no-obligation annuities service to discuss your needs and see if this option could work for you.

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.