In our latest Parameters survey we asked you if you were using more annuities in clients’ retirement planning, and if so why.
Notable increases in annuity rates, driven by rising interest rates, have seen significant growth in the use of annuities in financial planning in the UK over the past couple of years, as reflected in paraplanner responses to our recent Parameters survey.
Between 2022 and 2023, annuity rates increased by over 48%, making these products a more viable option for many retirees seeking financial stability. In 2024, rates increased by just 2.5% from January to October, according to the Standard Life Annuity Rate Tracker, giving an average annuity rate of 6.98% for a healthy 65 year old.
Economic uncertainty and fluctuations in investment markets, as well as concerns about outliving retirement funds, also have played into the growth in use of annuities, making their guaranteed income options more appealing.
Our Parameters survey shows that 56% of respondents saying they have increased their use of annuities in 2024, with annuities now “featuring regularly in our planning”.
The majority of paraplanners (62%) say they are using annuities as a complement to drawdown, rather than a as sole income stream.
Have you increased your use of annuities?
Yes 56%
No 41%
If yes, by roughly how much
50-100% 11%
40-50% 15%
30-40% 2%
20-30% 24%
10-20% 33%
Under 10% 15%
Are you mainly using annuities
In combination with drawdown 62%
As the sole income stream 22%
Other 16%
“The increased annuity rates have made them more attractive to some clients and definitely a more viable option, whereas previously annuities were all but ignored as they offered poor value unless a guaranteed income was essential,” one respondent said.
“The rates are better and we thoroughly research the options and give clients the full picture. We are more positive towards annuities where it is appropriate,” another concurred. “The rates are still good and suit many to at least partially secure an income.”
Not everyone is using them to any great degree. “Still fairly rare, but have done a small number for specific client needs,” one paraplanner said, while another said their firm does not use them at all.
However, paraplaners see the proposed changes to inheritance tax and pensions giving a boost to the annuity market, with comments such as:
“Not yet, but I’m expecting an uptick over next year and thereafter when we review plans after the Budget.”
“I’m sure their use will increase more now pensions are subject to IHT. I can see back to back arrangements being used”
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