Annuities are increasing in popularity again, with the number of sales outstripping drawdown policies, according to the latest figures by the Association of British Insurers (ABI).
30 MARCH 2016 | BY CINTIA CHEONG
To mark the first year since pension freedoms were introduced, the ABI said that in the fourth quarter of 2015 there were 21,200 annuities sold, worth £1.1m, compared with 19,700 drawdown policies, worth £1.4bn.
Yvonne Braun, the ABI's director of policy for long-term savings and protection, said: "This shows people still really value a lifelong guaranteed income."
Since the reforms came into force, £3bn has been taken out in 213,000 cash lump sum payments, with an average amount of £14,100.
Another £2.9bn has been paid out as 835,900 income drawdown payments, worth around £3,500 on average.
For funds that are being invested, £4.2bn has been invested in 63,600 drawdown policies, with an average fund of around £66,000.
For annuities, £3.3bn has been invested in around 61,700 funds, making the average invested around £53,000.
"One year on from the pension reforms, the freedoms are settling in and working as intended," said Braun.
"Our key challenge remains ensuring people save enough for their retirement. With increasing life expectancy and declining final salary pension provision, we must turn our attention to helping customers grow bigger pots."
Meanwhile, a separate survey commissioned by Fidelity International has revealed 61% of retirees have accessed cash from their pension pot.
Based on responses from 501 UK adults who have retired since April 2015, the survey found that of those who had accessed their money, around a third (29%) had already spent it.
One in four intended to spend their cash in the next two years while the remaining 28% would keep it for the longer term.
The firm also confirmed annuities "are not dead yet", as 36% of those not withdrawing their entire pot planned to purchase an annuity.
A further 31% decided to transfer some of their money into drawdown while 16% would leave their pension invested for growth and delay taking it.
Richard Parkin, head of retirement at Fidelity International, said: "The first year of freedom has perhaps been more focused on telling people what they can do.
"We need to make sure we continue to help them understand what they should do. Choices made at retirement cannot be easily undone and people will benefit from seeking expert help, even if only looking to take part of their savings as cash."