Annuities are becoming increasingly more popular as people start to look for a guaranteed income in retirement to handle the current cost of living crisis, according to this week’s podcast guests.
In 2022 annuity rates have climbed by 40-50 per cent - which is a 14-year high.
The rates have been boosted by soaring long-term gilt yields.
And in late September and early October there were some particularly sharp increases, which can be attributed to financial markets having less confidence in the government, following the “mini” Budget.
Appearing on the FTAdviser podcast, Emma Watkins, managing director of Retirement and Longstanding at Scottish Widows, said the decline in defined benefit pensions and the recent market market volatility has really shown people the value of a guaranteed income in retirement.
Watkins said: “Annuities will make a comeback because I think historically it's been either drawdown or annuity. But individuals, brokers and advisers are now understanding that actually a mixture of drawdown and annuity probably lends itself to better results.”
Echoing this sentiment, Mark Ormston, director of propositions and corporate partnerships at Retirement Line, said this can be achieved in increments with drawdown leading into an annuity.
He said: “When that longevity risk becomes too much to bear in someone's 70s or 80s, maybe switching wholesale to an annuity at that stage I actually quite like the idea of having the two working simultaneously so in conjunction with each other, if that's if that's possible.”
amy.austin@ft.com