The UK’s FCA has just published its’ latest retirement income market data, covering the period 2022/23.
As part of the detail published alongside the headline numbers, the data shows less than half of people (47%) seek advice or guidance (Pensions Wise) before buying an annuity, and this is trending down, compared with the same period two years previously, where 58% of people sought advice or guidance.
Nick Flynn, retirement income director, Canada Life, : “It is really disappointing to see inertia continue to play a big role in retirement income decisions, with far too many people not exercising their right to shop around for not only the best rate, but also the right shape annuity for their individual circumstances.
“The FCA data shows that fewer people are seeking advice or guidance before buying their lifetime income in the form of an annuity, which is an irreversible decision.
“Improving the availability of guidance and encouraging more people to seek the help of an annuity broker or independent financial adviser, rather than simply accept the status-quo from their pension provider, will provide better lifetime consumer outcomes.
“This is especially important as annuities are enjoying a renaissance, driven by the demand from customers seeking security in times of uncertainty, combined with the significantly higher incomes available.”
So how far have annuity rates come?
At the start of 2022, a benchmark1 annuity with a £100,000 purchase value would have paid an income in the region of £4,540 a year for someone aged 65 with no health or lifestyle conditions to declare. Roll the clock forward two years, that same annuity would pay around £7,000 a year, an increase of 54%, driven by rising interest rates and the returns available on gilts.
Over the course of a 20-year retirement, the annuity at today’s rates would deliver around £49,200 extra income compared to an annuity sold in January 2022.
Annuity providers have announced strong sales, and Canada Life recently reported record individual annuity sales of £1.2bn for last year.
