Personal PensionOct 23 2014

Freedoms cause 150,000 to delay retirement income decision

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Annuity and drawdown sales have dropped by almost a third as people wait for the new pension flexibilities in April 2015 to choose a product, according to research by MGM Advantage.

According to data gathered by the firm, more than 150,000 people have delayed picking a retirement income product as they wait until the new pension flexibilities are implemented in April 2015.

Data from MGM shows that, on an annual basis, 76,000 people have put off finding a product using the open market option until the new flexibilities come in and 75,000 people who would have got a product from their pension provider have delayed a product purchase.

These figures total £2.6bn and £1.1bn respectively and are calculated using data from the Association of British Insurers which came out in September. This £3.7bn “prize” is the subject of a provider innovation rush ahead of the rule changes, the firm has said.

According to MGM, sales of annuities and drawdown in the year ending in Q2 2014 totalled £9.9bn, a 27 per cent drop from £13.6bn the previous year. For annuities sales fell 39 per cent from £11.9bn to £7.2bn, while drawdown rose 59 per cent from £1.7bn to £2.7bn.

Predictions since the bombshell announcement at the Budget have suggested sales of conventional annuities could eventually fall by as much as 90 per cent, though relaxed rules around guarantees and which would allow annual annuity income to reduce could help arrest this decline

Specialist annuity firms have reported sharp falls in individual annuity new business in the months since the Budget.

Partnership’s results revealed annuities had fallen by around three quarters in the third quarter of this year, as it admitted a need to focus on diversifying the business model. Just Retirement has also reported a a 50 per cent fall in individual annuity sales.

ruth.gillbe@ft.com