Need for pension income means annuities aren’t dead yet

30th May 2014

img

The Budget relaxation of the drawdown rules was trumpeted as the death of annuities but new research shows the majority of retirees are still searching for a guaranteed income.

A survey by fund supermarket Hargreaves Lansdown after the Budget showed 94% of pension savers considered a secure income in retirement as ‘important’ or ‘very important’.

The focus on secure income comes after the Budget which allows retirees to access their entire pension pot as a lump sum through the drawdown rules.

While the rule changes have not had pensioners rushing to strip the cash from their pensions, it has pushed 57% to delay their annuity purchase and 80% said they would wait until further details about the new rules are announced before they make a decision.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said the figures showed annuities still had a place in retirement planning.

‘Retiring investors want clarity and certainty, both in terms of the rules governing their retirement income and in terms of their income payments themselves,’ he said. ‘This suggests reports of the annuity’s demise may have been greatly exaggerated. Some investors do now see drawdown as a more attractive options however, it is not a risk-free solution.’

McPhail said he expected retirees to opt for a combination of annuities and drawdown to provide them with security of income and some investment flexibility.

Insurers have already been discussing new retirement products, including hybrid annuity-drawdown products where part of a pension pot is used to buy an annuity to cover bills and the rest remains invested and drawdown as and when it is needed.

McPhail said the need for secure income will remain and annuities, despite their poor press, will still serve a purpose for many.

‘It is important to remember that for all the poor publicity around annuities in recent years, for the right people, at the right time and provided they shop around for a competitive rate, annuities can still be a very good solution. If you have a private pension, an annuity is the only option that can provide a guaranteed income for life.’

 

 

 

1 thought on “Need for pension income means annuities aren’t dead yet”

  1. Noo 2 Economics says:

    “for the right people, at the right time and provided they shop around
    for a competitive rate, annuities can still be a very good solution”

    So that will be 1 person in the UK then!!

Leave a Reply

Your email address will not be published. Required fields are marked *