Annuities far from dead as retirees prioritise guaranteed income
According to a survey by pension provider Retirement Advantage, certainty ranked as the top priority for 43% of over 50s when thinking about income in retirement, followed closely by flexibility (33%).
Being able to grow income or having instant access to funds ranked far lower as priorities, with only 10% and 14% respectively saying these were their top priority.
Annuities are the only product available on the market for retirees looking for a guaranteed income for the rest of their lives.
The products came under intense scrutiny after a Financial Conduct Authority (FCA) investigation revealed that many pensioners were picking the wrong annuity plan and falling to shop around for the best deal.
The introduction of the pension freedom rules, which allow people age 55 and over to access their entire pension pot as a cash lump sum, was widely expected to mark the beginning of the end for annuities.
However, the Retirement Advantage study suggests the products remain a viable option for many retirees.
“We asked people straight out what they would value most from their retirement savings, and certainty is their top priority,” said Andrew Tully, pensions technical director at Retirement Advantage.
“While the reforms put a lot more options on the menu for retirees, guaranteed income is still the most popular dish. Flexibility and freedom of choice are important, but certainty is still what most people want most of the time.”
The research, carried out by YouGov, also found that the over 50s are anticipating a 17-year retirement, expecting to retire at 65 and live to 82.
The most important aspects for retirement finance are the ability to pay bills (67%), go on holidays (60%), start new hobbies (38%) and pay for long term care requirements (24%).
Tully added: “It’s difficult enough to plan for a year in the future, let alone plan effectively on day one for potentially decades of retirement. People want to know they will be able to cover life’s essentials and still have the flexibility to enjoy life and deal with the unexpected.”
More on this topic: Why buying an annuity when you retire might still be the best option