As the popularity of annuity products continue to grow, experts at Quantum Advisory, the leading pensions and employee benefits consultancy for small and medium sized schemes and employers, have called for further development of annuities that better reflect retirement needs.
Annuities are seen as an attractive option for those approaching retirement as they provide a regular guaranteed income, either for a fixed period or for life. Research from Hargreaves Lansdown has revealed that the average annuity purchase size has increased by over 160% since 2021, with 2024 marking the best year for annuities since the introduction of freedom and choice.
Stuart Price, Partner and Actuary at Quantum Advisory, said: “More people are turning to annuities in their retirement planning, and this trend shows no signs of slowing down. With high annuity rates due to the high interest rate and high gilt yield environment we are currently in, momentum continues to build and 2025 could surpass 2024 as the best year for annuities.
“However, it is difficult to reverse annuity decisions, particularly if a lifetime annuity is selected, so savers must research all the options available to them.”
Following the launch of its ‘Flex First, Fix Later’ guided retirement income solution earlier this year, insurance provider Aviva is expanding its range of retirement products with the introduction of a new guaranteed fixed-term annuity. The move follows a joint report by Aviva and Age UK which stated that 83% of respondents felt that having a regular income in retirement had become more important as they got older.
The new annuity has been designed to offer customers a greater level of control of how they manage their pension pot and retirement income. The product offers a guaranteed income for a term between three and 25 years without requiring a lifetime commitment to provide financial stability and flexibility at the end of the fixed-term.
Stuart Price said: “It is good to see that the market is looking to develop retirement products to meet the everchanging needs of people in their later life. New annuity products are a step in the right direction, but there is scope to develop options that truly reflect savers’ lifestyles and offer greater control at different life stages.
“While drawdown provides flexibility and the opportunity to take a regular income, there are no guarantees due to the impact of markets and investment performance. The newly launched Aviva annuity product provides a guaranteed income but is not fixed for life so does provides a level of control and flexibility for savers.
“In the future, I would hope to eventually see some form of annuity product based on the ‘V shape’. This would reflect the needs of pensioners throughout their retirement: providing more income when an individual is just retired to meet their active needs and lifestyle, reducing when an individual becomes less active with less of a requirement for an income and then increasing again with age when income could meet care costs.”
