MetLife research found that advisers expect annuity rates will fall further as providers pull out of the market while stock market volatility will increase the risks of a fall in the value of investments as the UK prepares to negotiate its exit from the European Union.
Around 72% of the 102 advisers surveyed believe annuity income will continue to slide, while 73% are concerned about the impact of investment market volatility on drawdown as a result of Brexit.
MetLife believes that the need for advisers to focus on flexible guaranteed drawdown solutions as an alternative is highlighted by data from the Pensions and Lifetime Savings Association which shows 53% of savers considering a drawdown think it guarantees an income.
Most at risk are savers who are five years from retirement – with more than a quarter of advisers (27%) recommending they need guarantees to protect their funds. The number of annuity providers offering guaranteed options, however, has fallen to an all-time low of 11.
Threat to pension freedoms success
Simon Massey, wealth management director at MetLife UK, said: “Lack of consumer choice and understanding is a real threat to the success of pension freedoms as savers who want guaranteed income are being driven into traditional drawdown without understanding the risks.
"One thing is certain – with today’s low interest rates and ongoing investment market volatility, the need for a guaranteed income has never been more important.”
“Pension freedoms have been a major success story so far but there needs to be more innovation to provide a wider choice of options to ensure savers can benefit from flexibility while retaining certainty over their income. One thing is certain – with today’s low interest rates and ongoing investment market volatility, the need for a guaranteed income has never been more important.”