Sales of retirement annuities, which provide pensioners with a guaranteed income, have jumped, according to figures from the City regulator. Purchases increased by 13.2% to reach 100,144 in the year ending March 31, up from 88,430 in the previous year, the Financial Conduct Authority (FCA) said.
Soaring rates drive retirees back
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Soaring incomes are driving retirees back to annuities, with gilt yields helping to push annuity rates skyward over the past few years.”
She said Hargreaves Lansdown’s annuity search portal “shows a 65-year-old with £100,000 pension can get up to £8,061 per year from a single life annuity with a five-year guarantee. This is more than 60% up on the £4,940 available five years ago and has been tempting people in search of a level of guaranteed income back to the market.”
Research before you buy
Ms Morrissey said: “It’s vital to do your research before you purchase an annuity though. An annuity can’t be unwound, so think about what type of annuity best meets your circumstances.”
She added: “If you’re married, you may want to consider a joint life annuity that keeps paying an income to your spouse when you die. Opting for the higher income offered by a single life annuity could see them left with nothing. You also don’t have to put all your eggs in one basket and annuitise your entire pension at once. Annuitising in stages lets you secure income as your needs evolve.”
People with some medical conditions may also be able to get enhanced annuity rates, making shopping around for the right deal for individual circumstances important.
More pensions accessed
The FCA also said the total number of pension plans accessed for the first time increased by 7.4% to 1,047,008 in the year ending March 31, compared with 974,990 in the previous year.
Some 30.8% of pension plans accessed for the first time in the year to March 31 were accessed by plan holders who took regulated advice, which was broadly unchanged from 30.4% in the previous year.
