Sales of annuities have fallen by over a third between the first and second quarter of the year, the Association of British Insurers (ABI) have revealed.
Sales of annuities fell by almost a half between the first and second quarter of the year, the Association of British Insurers (ABI) has revealed.
The number of annuities sold in the second quarter of 2014 was 46,368, down 48 per cent from the same period in 2013 when the number of sales reached 89,896. Although it is too early to determine whether this drop in sales could be just a knee-jerk reaction to the Budget announcements this year.
Mark Stopard, head of product development at annuity provider Partnership, said there is obviously a large number of people who are just deferring the purchase of a guaranteed income product and waiting to see what new options they have in 2015 and settle it at a later date. “What we expect is that annuities will play a big part of the picture,” he added.
The ABI data also showed the average pot size used to purchase an annuity has gone up in the past year. In the second quarter of 2014, the mean pot size was £38,600 compared with last year’s £34,500. But the proportion of enhanced annuities has stayed the same compared with the first quarter – 29 per cent.
Mr Stopard said, “We will undoubtedly know better next year, but there are some customer trends emerging. There are some waiting to take all their pot as cash, which is a popular option – particularly with clients with smaller funds.
“Another trend is that people are, instead of taking a black and white approach, taking a more holistic view and seeing how much guaranteed income they need to make sure their basic needs are covered, and that is the trend that is gaining most traction.”
The Autumn Statement is set for 3 December, but the industry will have to wait once the final pensions consultation is released in the coming months.
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