At-Retirement? Don’t Forget The Good Old Fashioned Annuity

Recent data shows that there could be a return to the good old-fashioned pension annuity for those ‘at-retirement’ and making pension choices. The value of pension annuity contracts taken out rose by 34% in 2024, rising to £7bn, surpassing last year’s total and reaching a new ten-year high.

Indeed, the total number of annuity contracts taken out by people ‘at-retirement’ was also up by 24% from 2023, at 89,600.

Despite the State Pension Age being 66 throughout 2024, the most common age for purchasing an annuity remained at 65, accounting for one in five of all annuities.

If you do end up opting for a pension annuity over flexible drawdown, data shows that 69% of annuity buyers switched provider for their annuity purchase rather than stay with their original pension provider.

The proportion of joint life annuities, enhanced annuities and escalating annuities all increased. Annuities are more complex than you might think and anyone at this point in their life would definitely benefit from an independent look from our SOLLA accredited advisers in order to maximise their retirement income.

The return of the annuity is probably mainly due to the rise in interest rates since the end of 2022. Nevertheless, annuities remain only a small part of the ‘at-retirement’ market. FCA data shows that annuities account for only 9% of pension plans accessed for the first time. Pension drawdown, under the pension flexibility rules, still being the most popular way of accessing you pension ‘pot’.

Remember there is a third option – to combine drawdown with a phased annuity approach – providing perhaps certainty and flexibility in retirement. A phased annuity approach is where retirees purchase annuities gradually over time. This approach can potentially lead to a higher overall income whilst mitigating inflation risks and benefiting from improving annuity rates with age.

If you are ‘at-retirement’ and are faced with important financial decisions which could affect your whole retirement then get in touch for a complimentary financial review. Pensions are complex financial products and its best to take independent financial advice to arrive at the optimal solution for you and your family.

Call 0117 3636 212 or email office@haroldstephens.co.uk for a relaxed chat about your circumstances.