UK variable annuity sales rose to £1.42bn in 2012, an increase of 30 per cent over 2011, research by Towers Watson has revealed.
Quarterly sales exceeded £400m for the first time in the last quarter of 2012. Policy numbers also increased in comparison to 2011 by 19 per cent to 16,200.
Mike Williams, a leader in the insurance management consultancy team at Towers Watson, said: “It is very encouraging that variable annuity sales grew to record levels in 2012, in both premium and policy number terms. Further progress will however depend on establishing the virtues of variable annuities with an increasing number of consumers – the variable annuities sold in 2012 were less than 4 per cent of the total number of at-retirement market sales.”
According to the firm, those with pensions savings approaching or at retirement are increasingly in need of guidance and advice to help deploy their assets effectively. Looking forward, and with the Financial Services Authority’s thematic review of annuities as a likely impetus, Towers Watson sees more emphasis on alternatives to conventional annuities – such as enhanced annuities, fixed term (temporary) annuities and variable annuities – and considers it appropriate for a sizeable segment of consumers to make use of these alternatives in delivering retirement income.
Mr Williams said: “With increasing life expectancy, newly retiring pensioners who are prepared to take a long-term view of their financial options may welcome the combination of potential income growth and guarantees on offer through variable annuities.
“Evolving designs to provide compelling propositions, as well as communicating that there are also risks associated with locking into prevailing market conditions through a one-off annuity purchase at retirement, will be the keys to future market growth.”
