PensionsNov 18 2014

Retirement adviser finds 75% now opting for flexibility

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Retirement income adviser My Pension Expert has seen lifetime annuities drop to 25 per cent of total business written from close to half immediately prior to the Budget, emphasising the shift to more ‘flexible’ products in the wake of the pension freedoms announcement.

Fixed-term annuities now account for a total of 57 per cent of all business written, up 19 per cent on the pre-Budget figures, as retirees opt for short-term products to tread water under the full changes come into effect in April.

Income drawdown has also jumped to 17 per cent of business written, from just 1 per cent before the Budget. However, invested annuities have fallen to 4 per cent from 13 per cent.

The total percentage of people selecting fixed-term annuities, income drawdown and flexible drawdown is 75 per cent, up from 40 per cent prior to the chancellor’s announcements on at-retirement reform.

Following this year’s pension reforms, all providers have seen a drop in individual annuity sales. Today, Prudential’s results revealed its individual annuity sales dropped by 47 per cent, while income drawdown sales grew by 128 per cent.

Earlier this month, Legal and General said its individual annuity sales in the nine months to September were £508m, down 53 per cent compared to the first nine months of 2013.

Scott Mullen director at My Pension Expert, said: “An advisor can talk an individual through their options and find the right product that best suits their unique needs. Should that be a drawdown product they can ensure that it is managed correctly and reaches its full potential.

“With annuity rates at low levels and the introduction of the new pension freedoms it’s easy to understand why retirees are opting for the more flexible options at retirement so that they can take their time with major decisions and re-evaluate their needs well into their retired life.”

peter.walker@ft.com