16 February 2024 , 11:45
581
0
Sales of retirement annuities hit a record high since the introduction of pension freedoms, according to the Association of British Insurers (ABI).
In 2023, annuity sales rocketed with a total value of £5.2 billion, marking a 46% increase compared to 2022. This is the highest annual value since 2014 when pension freedoms were announced, giving retirees more control over their retirement savings.
These freedoms, introduced in 2015, offered those aged 55 and over various options on how to use their defined contribution (DC) pension pot. Before these changes, many would have purchased an annuity, which provides a guaranteed income for retirees.
However, annuities had faced criticism due to low rates and concerns that people weren't shopping around for the best deals. The ABI believes the strong sales are due to higher interest rates, as more people seek a reliable retirement income.
Last year also saw a bumper fourth quarter with £1.5 billion in annuity sales, following a strong third quarter when sales reached £1.4 billion. Level-only annuities, which offer the same pay every year but can be vulnerable to inflation, stayed the most popular option, the ABI shared.
8 money changes coming in February including Universal Credit and passport fees
This sort of annuity has a higher starting income than an inflating annuity - which gives an income that grows yearly. Last year saw almost two-thirds (64%) of annuity shoppers looking around for the best deal - getting an annuity from a different provider to the one holding their pension savings.
However, only 29% of customers who bought an annuity did so with professional help. Rob Yuille, leader of long-term savings policy at the ABI, said: "Securing a guaranteed income for life remains an important part of the mix of options for people to consider at and during retirement, and it's great to see more people taking advantage of the protection they have to offer.
"It is also encouraging to see more people exploring the market to secure a higher income. However, we'd like to see more people taking advantage of professional advice and new forms of targeted support for consumers to ensure they can enjoy the best possible retirement."
Stephen Lowe, group communications spokesperson at retirement expert Just Group, quoted: "It's good to see the majority are finding their way to the best deals which is a significant improvement on the past, but there are too many people still missing out."