Demand for single life annuity products from financial advisers fell 4.8 per cent in June, and are down 58 per cent from the start of the year as consumers wait to receive guidance and understand the full scope of their retirement options from April 2015, according to a new report.
Despite the fall in annuity activity, average retirement income increased by 3.7 per cent in June to £3,552 per year, up from £3,426 in May 2014 and £2,942 in June of last year, Iress’ ‘at retirement’ report revealed.
Dave Miller, executive general manager, sourcing at Iress, said, “Annuities demand has been hit in the short term, as consumers understandably hold fire until they have received guidance or see the extent of their options in April.
“While demand for annuities may not hit previous heights, the protection they offer against increasing longevity ensures they will remain relevant to financing retirement, especially as innovation accelerates in the space.”
The average pension pot for annuitants at retirement hit £65,232 in June, an increase of 3.3 per cent compared to May and 13.3 per cent higher than £57,560 one year ago.
This is the highest level in two years, and four of the last five quarters have now seen year on year increases, pointing to an encouraging longer-term trend.
The study, which analysed data from over 150,000 annuity cases, also found that the average single life standard annuity rate rose to 5.44 per cent in June, the highest level since January and an increase from 5.11 per cent in June 2013 and 5.42 per cent in May.
“In this context, it is a step in the right direction that income is climbing, with rates inching up and pot sizes reaching their largest in two years.
“Some new retirees may be opting to cash in smaller pots rather than annuitise, but the longer term trend suggests we may be seeing a steady shift towards building greater savings.
“This will only be boosted by the long-term impact of auto-enrolment and the publicity given to the importance of pensions savings since the Budget,” Mr Miller said.
