Annuity sales soared to a ten-year high in 2024, according to the latest pension annuity data from the Association of British Insurers.
Sales of pension annuity contracts jumped 24% in 2024 to 89,600 as more people sought to secure a guaranteed income for life. In total, annuities sales reached £7 billion last year, a 34% increase on 2023.
The data found people were more likely to shop around, as 69% of annuity buyers took an annuity from a different provider to the one they held their pension savings with, compared to 64% in 2023. It also showed that more annuity purchases occurred after taking financial advice in 2024, with 36% of buyers taking advice beforehand compared to 29% in 2023.
Rob Yuille, head of long-term savings policy at ABI, said: “These figures demonstrate just how valuable annuities are in the mix of retirement products. Buoyed by improved rates, the appeal of a guaranteed income for life can help people achieve financial security in retirement.
“It’s also encouraging to see that more people are taking advantage of professional advice before purchasing an annuity and are exploring the market to find the best income and a type of pension that is tailored for them.”
The ABI said the most common age to purchase an annuity continues to be 65, making up 20% of all sales. The proportion of joint life annuities that provide for a dependant, enhanced annuities based on health and lifestyle underwriting, and escalating annuities, that keep pace with inflation, also all increased.
Stephen Lowe, group communications director at Just Group, said: “Competition is thriving in the retail annuity market thanks to the focus of financial advisers and brokers shopping around on behalf of their clients. £75 of every £100 invested in annuities was placed in the open, external market. The upward trend in people taking financial advice when buying an annuity is very positive, as is the higher proportion of buyers securing enhanced annuity rates.”
Lowe said the figures show the majority of retirees are finding their way to the best annuity deal, in contrast to the past when many missed out.
“Guaranteed income producing assets are very much in the consideration set alongside other assets. Sales of annuities are 66% higher than when pension freedoms were introduced in 2015. It’s great to see shopping around and switching become the norm because it means more money in people’s pockets every year for the rest of their lives,” he added.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said that 2025 is likely to follow on from 2024’s bumper year.
“After years in the doldrums, the market has been kick-started off the back of rising interest rates and soaring gilt yields and this has tempted retirees back to the market,” she explained.
Hargreaves Lansdown data shows a 65- year-old with a £100,000 pension can get an income of up to £7,490 per year from a single life level annuity with a five-year guarantee.
“The fact that rates have remained high at the start of 2025 bodes well for annuities and means we could see a good chunk of the robust growth of 2024 stretch into 2025 too. With the decline of defined benefit pensions, many retirees are in need of a level of guaranteed income and so it’s a real positive to see the annuity market delivering good value.”
For those nervous about locking in an income, Morrissey said pension savers should consider annuitising in slices throughout retirement, securing income as their needs evolve, while keeping the rest in drawdown.
“Annuitising at later ages can bring higher incomes and the increased probability that you will qualify for an enhanced annuity, with higher payouts. It’s an approach that can bring both certainty and flexibility to people’s retirement plans,” she added.
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