PensionsJul 14 2015

Annuity demand remains low 100 days after reforms

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Annuity demand remains low 100 days after reforms

In the 100 days since the pension reforms were introduced, remaining invested has proved 10 times more popular than taking out an annuity, according to Hargreaves Lansdown research.

According to the Bristol-based company’s research, annuity purchases make up just 7 per cent of all retirement transactions.

Of those buying an annuity on the open market, nine out of 10 are now benefiting from an enhanced rate.

Nathan Long, head of corporate pension research at Hargeraves Lansdown, said: “Remaining invested through retirement is proving popular as pension investors embrace the new freedoms.

“While these early indications still include pent up demand for income drawdown, it is clear that retirement has become far more personal and people retiring from the workplace will choose the options that best suit them based on their finances, family needs and health at the time.

“HR teams will look with interest at the high demand for semi-retirement and will perhaps re-visit their strategy for managing older workers.”

Transactions have been weighted heavily to investment-backed retirement incomes, with 78 per cent opting for drawdown in May 2015, whilst 15 per cent chose Uncrystallised Funds lump sum withdrawals and just 7 per cent opted for an annuity.

But take up of the government’s guidance service remains low, Mr Long said, with just one in seven (14.25 per cent) going to Pension Wise and only one in 200 (0.54 per cent) opting to ask their employer.

More than two in five (43.82 per cent) have been happy to do it themselves.

Two in five investors who have accessed their retirement savings in the past month are still working, with 18.28 per cent working full time and 21.77 per cent working part time.