Lifetime annuities to keep top spot for income
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Lifetime annuities look set to remain by far the most popular retirement income product over the next five years despite innovation in the market.
Xafinity Paymaster surveyed a mix of insurers, service providers and distributors and 90 per cent say the majority of annuitants will continue to buy lifetime annuities as they have small pension pots and need security.
More flexible products such as temporary and investment-linked annuities are seen to be too expensive and too sophisticated for the majority of consumers.
Forty-five per cent disagree that Solvency II will see lifetime annuities become too expensive for most policyholders or members of defined contribution schemes while 37 per cent supported this view.
Some respondents believe insurers are already pricing for Solvency II while others believe the regulations will be amended to improve the annuity reserving position.
Almost 65 per cent believe the existing range of annuity products along with income drawdown and alternatively secured pensions will meet the needs of the UK market for the next five years, although 22 per cent disagree.
Many claim that individuals require a blended set of retirement products but that the size of their pension pots will prevent this. The research also suggests that individuals will increasingly save for their retirement using non-pension savings vehicles.
Respondents express concern that too few people receive adequate advice at retirement and that many buy their annuity without any appreciation of the range of products available. They says improved quality of advice rather than more products is needed.
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