Four in 10 (41%) of over 50s said the cost-of-living crisis is the main barrier that might prevent them from securing the retirement income they think they’ll need.
Research by Standard Life found that one in 10 of those approaching retirement are more likely to purchase an annuity as a result, with income certainty, security and simplicity as key reasons for this option.
A further one in 10 (11%) with a defined contribution DC pension or SIPP said they were more likely to purchase an annuity with their pension pot in light of the cost-of-living crisis.
Other barriers to securing retirement income highlighted by the research include changes to the state pension, tax rises, stock market performance and not seeking advice.
Worryingly, half of over 50s expect their personal financial situation to get worse over the next year. Just 16% expected their own personal finances to get better.
The study by Standard Life explored how the high cost of living over the past year has driven changes in how people plan to use their retirement savings. More than a third (38%) cited certainty that an income would be guaranteed for life as a key reason why there are more likely to purchase an annuity in the current climate.
Others cited simplicity (34%) as well as security in the knowledge that the amount of income won’t change (32%).
Pete Cowell, head of annuities at Standard Life, said: “In a cost of living crisis, in which every penny counts, annuities can offer what many people are looking for in retirement – certainty and security, knowing that their money will last as long as they do. The income security benefits of annuities are well known, however with the improvement in annuity rates, which have seen a total increase of 48% since the start of 2022, they also offer a better level of income.
“While annuities can be purchased standalone, it’s also important to bear in mind that they can also work well in combination with other retirement income solutions, such as drawdown. People may opt to buy an annuity with a portion of their savings and invest the remainder, which gives people certainty about their ability to meet fixed costs. They can take some risk on the money that remains invested while maintaining flexibility over when and how they access it.
“Alternatively, buying an annuity at different stages of retirement allows people to benefit from annuity rates, which increase with age. Whatever the course of action, a mix and match approach suited to individual circumstances can often be an ideal way to get the best of both worlds – security in the current economic climate, but also flexibility for the future.”
