At-retirement market to triple to £50bn by 2023

The consultancy’s findings showed that the total UK at-retirement market is set to grow considerably in the next 10 years. Its analysis used projections derived from a study of the aggregate value of UK pension pots for different age segments.

Towers Watson noted that as the growth unfolds, “more people will have money in defined contribution funds and will need to take active decisions about what to do with them”.

There has been a rapid decline in active membership of private sector defined benefit schemes and this will continue in the coming years, with surveys conducted by Towers Watson showing that 37 per cent of companies with DB schemes say these are closed to future accrual, a figure expected to increase to 73 per cent in five years’ time.

Market growth could be even larger after the government’s announcement on Monday to allow transfers from final salary schemes into new DC pots, the firm noted.

Jeremy Nurse, a director at Towers Watson, said: “This growth in the overall market and the increased flexibility retirees will have in how they use their pension pots should encourage innovation from product providers to ensure they offer customers attractive income and protection options.”

Mr Nurse added: “Contrary to the gloomy picture of the future of the annuities market that has been painted since the March Budget, we think annuities will remain an appealing and safe proposition to many consumers and an attractive market to providers.

“Over and above the numbers we’ve arrived at, there are several circumstances that could push future annuity sales higher in our opinion, particularly with the government’s decision to allow transfers from company final salary schemes and its encouragement of product innovation, such as annuities with declining payments or from which lump sums can be drawn.

“Higher interest rates, and a restoration of confidence in the value of the products would also have an effect.”