3rd September 2014
Investment platform and broker Hargreaves Lansdown says it has seen a 41% fall in annuity business and a 29% increase in drawdown in the 12 months to June 2014.
The firm says that the annuity market has seen sales across UK fall by around 40% in the last year and by 50% since the budget on 19th March, leaving £1.5 billion of retirement money across UK market currently in limbo.
Tom McPhail, Head of Pensions Research says that in the long term, his firm believes the demise of the annuity market has been overstated as many people will still want to buy some secure income.
“Some investors have been happy to defer drawing on their retirement funds while they wait to see what options emerge,” he says. The firm is promoting its ‘Retirement Bridge’ which offers a very low cost income drawdown option until a final decision can be made.
He says many investors have indicated that they are waiting to see what their options will be from April next year. They have heard about the Budget changes but don’t know what they mean in terms of retirement income options”. The firm notes that its research shows that 80% of prospective annuity purchasers who had now chosen to delay, are simply waiting for more details to emerge.
The firm calculates that prior to the Budget, annuity sales across the UK market were running at around 30,000 a month. With an average purchase price of £21,000 and given that sales have nearly halved in the 5 months since the budget, this means more than £1.5 billion has been left in limbo.