Tide turning as annuities lure us back

BACK in the day it was pretty much compulsory to buy an annuity, but the moment that obligation was dropped, sales collapsed.

- By HARVEY JONES

Many are now tempted by annuities

Many pensioners didn't want to know. Rates had plunged to record lows after the financial crisis, and when 2015 pension freedoms arrived, they embraced them.The new rules allowed savers to leave their money invested in the stock market via income drawdown, giving it the chance to continue growing while they took a regular income or lump sums as required.

Three in four retirees did just that, and many have benefited as stock markets performed strongly.

But lately the tide has been turning.

By 2014, collapsing interest rates meant a £100,000 pension pot might secure as little as £4,500 a year from a single-life level annuity. Today, that's climbed to roughly £7,700.

To a growing number of pensioners, that guaranteed income for life looks attractive. Should they be tempted?

Demand is rising. Brits spent £7.4billion on annuities in 2024, a 4% increase and the highest level since pension freedoms were introduced.

While the number of policies sold actually fell 2% to 87,600, those taking the plunge are committing larger sums. Sales of annuities worth more than £250,000 rose by almost a third, while those over £500,000 jumped by more than 50%. The average annuity now stands at £84,000, the first time it has passed £80,000.