Annuity premiums have hit their highest level since 2015, as their sales surged 22 per cent.
Annuity premiums for the first quarter of this year rose to £1.2bn, according to the Association of British Insurers.
There was also a rise in the number of people switching provider, with 10,000 people purchasing an annuity from a different provider to their current pension savings provider, making up 64 per cent of sales.
This is a 9 percentage point rise on the same period last year.
Overall, 16,256 annuities were bought in the first quarter of this year, slightly lower than the record 17,252 sold between July and September 2019.
The ABI said retirees are also focussing on products which protect them from inflation, with the sale of escalating annuities (which provide an income that increases every year), growing 23 per cent.
ABI director of long-term savings policy Yvonne Braun said: “Annuities offer a guaranteed income for life, like a final salary pension scheme.
“It's great to see more people taking advantage of the protection annuities have to offer, especially given the current favourable rates.
“Securing a guaranteed income for life remains an important part of the mix of options for people to consider at and during retirement."
Stephen Lowe, group communications director at Just Group, said it is encouraging to see nearly two-thirds of retirees used their right to shop around and to switch away from their existing pension savings provider to a more competitive provider of annuities, although that still shows around a third are likely to be missing out on extra income.
“Shopping around is particularly important because it’s the closest thing to ‘free money’ in the retirement world and staying loyal to a provider can cost you dearly,” he said.
“The gap between the top and bottom providers has widened to the point that a healthy 65-year-old can secure nearly 14 per cent more annual income by securing the best instead of the worst rate, and potentially an even higher income depending on lifestyle factors and medical history.”
Annuities inhabit a unique space in the retirement world, he said, as they are the only solution that removes both investment and longevity risk.
“Most retirees will want the peace of mind of having a level of secure income to pay the bills – that’s true pension freedom.”
sally.hickey@ft.com
