There was a 44% drop in annuity sales in June when compared to the same month last year, according to research by financial systems provider IRESS.
30 JULY 2014 | BY JUDITH UGWUMADU
The firm claimed this drop was the result of the Budget changes announced in March, which has led to people postponing annuity purchases until they receive more advice on their options.
Dave Miller, executive general manager for sourcing at IRESS, said: 'Those planning to retire have seen a seismic shift since March, and the dust is far from settled. Annuities demand has been hit in the short term, as consumers understandably hold fire until they have received guidance or see the extent of their options in April.
'While demand for annuities may not hit previous heights, the protection they offer against increasing longevity ensures they will remain relevant to financing retirement, especially as innovation accelerates.'
IRESS analysed data from over 150,000 financial advisers, finding a 43.8% decline in the number of annuities sold in June 2014 compared to June 2013. Compared to May 2014, annuity sales were down 4.8%.
Meanwhile, the average single annuity income climbed to £3,552 per year in June, up by 3.7% from £3,426 in May. This is the highest level for at least a year and compares to £2,942 in June 2013.
The increase was caused by a combination of larger pension pots and annuity rates ticking up. The average pension pot for annuitants at retirement is at its highest level for at least two years, hitting £65,232 in June, according to IRESS. This is an increase of 3.3% in May and 13.3% higher than a year ago (£57,560).
Standard single annuity rates stood at 5.44% in June, up from 5.11% in June 2013 and a slight increase up from 5.42% in May.
'In this context, it is a step in the right direction that income is climbing, with rates inching up and pots sizes reaching their largest in two years,' said Miller.
'Some new retirees may be opting to cash in smaller pots rather than annuitise, but longer-term trends suggest we may be seeing a steady shift towards building greater savings.'