The UK at retirement market will triple to £50bn by 2023, pushed by substantial annuity sales, according to analysis by Towers Watson.
The actuaries said the market is set to grow considerably in the next ten years. The firm's study used projections derived from the aggregate value of UK pension pots for different age segments, estimating that inflows into the market would reach £50bn.
However, growth could be even larger after the government gave the go-ahead this week for transfers from financial salary schemes into DC ones, Towers Watson said. Currently, 37% of companies with final salary schemes have closed them to future accrual, but this is expected to increase to 73% in five years time.
Towers Watson director Jeremy Nurse said: 'This growth in the overall market and the increased flexibility retirees will have in how they use their pension pots should encourage innovation from product providers to ensure they offer customers attractive income and protection options.'
The firm's findings follow the March Budget where George Osborne unveiled a series of radical retirement reforms, including allowing retirees to withdraw their pension pot without having to purchase an annuity.
According to Towers Watson, wider savings market trends will result in projected annuity sales rebounding to over £10bn by the end of 2023. Prior to the Budget announcement, however, the annuities market was worth £12bn per year, the firm said.
'Contrary to the gloomy picture of the future of the annuities market that has been painted since the March Budget, we think annuities will remain an appealing and safe proposition to many consumers and an attractive market to providers,' Nurse added.
'Over and above the numbers we've arrived at, there are several circumstances that could push future annuity sales higher in our opinion, particularly with the government's decision to allow transfers from company final salary schemes and its encouragement of product innovation, such as annuities with declining payments or from which lump sums can be drawn. Higher interest rates, and a restoration of confidence in the value of the products would also have an effect.'