Fewer retirees are taking regulated advice before switching their pension cash into income drawdown and guaranteed income for life solutions, despite annuities causing confusion among many over-50s.
Research from retirement specialist Just Group found that of the 267,204 decumulation products sold in 2022 just over 41% were sold without advice compared to 34% in 2018. In the same period, the annual number of advised sales dropped by 7% to 157,011, while the number of non-advised sales jumped by 24% to 110,193.
Stephen Lowe, group communications director at Just Group, said: “Advice is important in a market where there are multiple providers with often quite different rates on offer, as is the case in the annuity market.
“The regulator and policymakers have a responsibility to make sure people are making informed and considered choices that they don’t later regret. These figures put a big question mark over their success so far.”
Lowe’s warning comes as separate research from Canada Life revealed that 20% of over-50s do not believe annuities offer good value, despite annuity rates being at a near 14-year high.
Over two-fifths (44%) of over-50s also consider annuities to be inflexible and a similar proportion (50%) also think of annuities as risky because of the possibility of losing money due to be paid out if the annuitant dies earlier than expected. However, longer guarantees and value protection can be chosen at outset, which provides a ‘money back’ guarantee, with the remaining income paid to a nominated beneficiary.
Canada Life said the findings highlighted a “real lack of awareness and understanding” around annuities, with many people unsure of how annuities work.
Nick Flynn, retirement income director at Canada Life, said: “Annuities tend to be sold, rather than bought. This is exacerbated by the misconceptions that have built up around annuities as a product which has been out of fashion but they are worth more than a cursory second glance. From significantly improved rates, to longer guaranteed periods which effectively provide a money-back option, to retirement account annuities where your income can be switched on and off, there is so much more to explore with annuities than perhaps is seen at face value.
“Working with advisers, the industry needs to work harder to overcome the hurdles and provide clearer arguments to reconsider annuities. After all, they are the only game in town that can offer 100% peace of mind, that whatever happens, your retirement income will continue to be paid.”
