Some insurers are reporting record-breaking annuity sales driven by the significant increase in value offered from the returns available, combined with customers seeking income security in times of economic uncertainty.

For example, Canada Life’s UK half year financial results report record-breaking annuity sales, up 100% on the same period in 2022.

The insurer said that May 2023 was a record month for individual annuity sales, with more than £100m in new business in one month, the highest sales figure since the pension freedoms of 2015.

At Canada Life, new business sales for individual annuities were £441m in the first half of 2023, compared to £220m in the same period in 2022.

According to Canada Life, a benchmark annuity for someone aged 65, with no pre-existing health or lifestyle conditions, would currently pay in the region of 7%. However, this annuity rate can increase significantly when disclosing common health or lifestyle conditions, such as diabetes, high blood pressure or being a smoker. Age can also have a big influence on the annuity rate offered.

‘Record-breaking annuity performance’

Lindsey Rix-Broom, CEO of Canada Life UK, said: “The record-breaking performance of annuities has been a major driver of new business sales and the outlook for the second half of the year looks similarly very positive.

“We remain focussed on supporting our customers and communities during challenging economic times. The diversity of our business across wealth, retirement, group protection and asset management means we are well placed to meet the evolving needs of our customers and their advisers.”

Tom Evans, managing director of retirement at Canada Life UK, said: “The annuity market has been revitalised by the much better incomes now available, but there has been a quiet revolution going on since the pension freedoms were introduced.

“From the introduction of longer guarantee periods, 100% value protection, and more flexible retirement products, customers have an attractive alternative to drawdown to deliver the best value from their pensions. Seeking advice, shopping around, and not viewing the decision between annuity and drawdown as a binary choice can deliver a better retirement outcome.”