Sales of self-invested personal pensions (Sipps) spiked in 2021 after experiencing a dip during the first months of the pandemic, data by the Financial Conduct Authority (FCA) shows.
There was a 15% year-on-year increase in Sipps sold in 2021 to 851,963 from 740,418 in 2020.
According to Tom Selby, head of retirement policy at AJ Bell, this clearly shows that Sipps have become “the most popular product among retail retirement savers”, as drawdown is now “firmly established as the dominant option” in the market.
“The number of people entering drawdown rose 21% from 2020 to 2021, reflecting a return to confidence among savers taking a retirement income while staying invested in markets,” he added.
“That confidence faces an arguably even sterner test at the moment, with economies around the world struggling to combat rapidly rising prices and the continuing uncertainty caused by Russia’s war in Ukraine.”
Hybrid strategies
At the same time, annuities sales have remained steady throughout 2020 and 2021, with approximately 10,000 products sold per quarter, FCA data shows.
But Selby believes rumours of “the death of the annuity market” were perhaps premature despite sales figures being lower than pre-pension freedoms with 44,0000 plans sold in 2021 – up 7% from 2020.
He continued: “Rising interest rates could help boost the attractiveness of a guaranteed income for life marginally, although other factors – namely the inflexible nature of the product – mean many will prefer not to go down this road.
“For lots of people a combination of annuity and drawdown will likely be the right solution. For example, annuities tend to become better value as we get older, while some will adopt a mix-and-match approach, using an annuity to cover fixed costs and opting for flexibility with the rest.”
