Advisers have said that the revival in popularity in annuities following their post-pension freedoms fall has not come as a surprise.
Data from the Association of British Insurers (ABI) revealed that across the fourth quarter of last year, 21,200 annuities were sold – worth £1.1bn – compared with 19,700 drawdown policies – worth £1.4bn.
Annuity sales are now almost on a par with drawdown sales since the reforms came into effect, the ABI data found.
It also revealed that overall, since April 2015, £3bn has been paid out in 213,000 cash lump-sum payments, with an average payment of £14,800.
A total of £2.9bn has been paid out via 835,900 income drawdown payments, with an average payment of £3,500.
According to the ABI, smaller pots were generally being taken as lump sums, while larger pots were still being used to access a regular retirement income, with an average fund invested of £59,600.
The data also suggested that the amount of cash lump-sum withdrawals was decreasing, as demand settled following the reforms.
Jon French, an IFA at Swanley-based AW Financial Management, agreed that the longer guarantees had made a difference to sales.
“It does not surprise me that there is a surge back in annuity purchases, and this is partly because product providers’ advertising has been a bit more poignant or clearly marketed.
“They used to offer only 10-year death benefits and this has gone up to 30 years – you are almost guaranteed to get your money back.”
Adviser view:
Simon Webster, managing director of Kent-based Facts and Figures chartered financial planners, said while the pension freedoms remained highly attractive to a number of people, many still preferred guarantees.
“Clearly, there were a number of people with financial issues where the pension freedoms provided a useful Band Aid. Now that the rush of cases has gone through, we are looking at standard retirement scenarios.”
| ABI Pension Freedoms Data | Q2 2015 | Q3 2015 | Q4 2015 | Total- nine months since reforms |
| Cash withdrawals | £1.3bn paid out in cash lump sums, an average payment size of just under £15,000. | £1.2bn paid out in cash lump sums, with an average payment size of just over £15,000. | £660m paid out in cash lump sums, with average payment of just over £14,000. | £3bn paid out in just over 213,000 cash lump sum payments, an average payment of nearly £15,000. |
| Drawdown withdrawals | £1.2bn paid out via 282,000 income drawdown payments, an average payment of nearly £4,200. | £970m paid out via 324,000 income drawdown payments, an average payment of nearly £3,000. | £730m paid out via 230,000 income drawdown payments, an average payment of nearly £3,200 | £2.9bn paid out via 836,000 income drawdown payments, an average payment of £3,500. |
| Annuity sales | £990m invested in around 18,200 annuities, making the average fund invested just over £54,500. | £1.17bn invested in around 22,380 annuities, making the average fund invested just over £52,300. | £1.1bn invested in around 21,200 annuities making the average fund invested nearly £51,900 | £3.3bn invested in around 61,700 annuities, making the average fund invested nearly £53,000. |
| Drawdown sales | £1.3bn invested in 18,800 income drawdown products, an average fund size of almost £69,000. | £1.55bn invested in 25,100 income drawdown products, an average fund size of almost £61,900. | £1.35bn invested in 19,700 income drawdown products, an average fund size of almost £68,500. | £4.2bn invested in 63,600 income drawdown products, an average fund of just over £66,000. |
Source: ABI
