Sales of annuities in the first quarter of the year reached their highest level since 2014, figures from the Association of British Insurers have revealed.
The data showed that £1.19 billion of annuities were sold in the first three months of 2023, up from £902 in Q4 2022 and £839 million in Q1 2022.
The figures also showed the external annuity market, which allows retirees to shop around, reached £847 million in the first quarter, compared to £578 million in Q4 2022 and £463 million in Q1 2022.
According to the ABI, the external market accounted for 71.5% of the total market by premium in the first quarter, the highest ever number reported. In addition, the average external market premium also increased to £81,600 during the first quarter from £71,700 in the final three months of last year.
Stephen Lowe, group communications director at Just Group, said: “It’s encouraging to see nearly two-thirds of retirees used their right to shop around and to switch away from their existing pension savings provider to a more competitive provider of annuities, although that still shows around a third are likely to be missing out on extra income.
“Shopping around is particularly important because it’s the closest thing to ‘free money’ in the retirement world and staying loyal to a provider can cost you dearly.”
The gap between the top and bottom providers has widened to the extent that a healthy 65 year old can secure nearly 14% more annual income by securing the best rate instead of the worst rate.
Lowe added: “The ABI’s figures suggest the average pension used to buy an annuity was nearly £74,000 but even far smaller amounts than this are significant and justify seeking professional help.
“Beyond finding the best rate, brokers and advisers can help retirees choose the best ‘shape’ in terms of a spouse’s pension, death benefits and inflation-protection options which becomes more important at a time of sharply rising costs.
“Annuities inhabit a unique space in the retirement world. They are the only solution that removes both investment and longevity risk. Most retirees will want the peace of mind of having a level of secure income to pay the bills – that’s true pension freedom.”
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