The Budget pensions reforms have had a crippling impact on sales of annuities, official figures published by the ABI show.
Sales dropped by 38 per cent between the first and second quarter of 2014. However, annuity sales are 42 per cent down compared to the same quarter in 2013, suggesting the insurance products were falling out of favour before the Chancellor made his announcements in March.
Around 90,000 annuities worth about £3bn were sold in Q2 2013, compared to just 46,368 annuities totalling £1.8bn between April and June this year.
The data also shows the average pot size used to buy an annuity rose during the quarter, from £34,500 last year to £38,600 in Q2 2014. The ABI says this suggests people with smaller pots are waiting to take advantage of the freedoms announced in the Budget.
Despite the problems of savers failing to shop around for the best-priced annuties, of those who did buy annuities in Q2 2014, a greater proportion (55 per cent) bought them off their existing provider compared to the previous quarter (48 per cent) and year-on-year (49 per cent).
Enhanced annuities made up the same proportion (29 per cent) of all annuity sales as they did in the first quarter of the year, but this is up slightly on the same quarter last year (25 per cent).
The number of new drawdown contracts sold rose from 6,132 in the first quarter of 2014 to 9,498 in the second.
ABI head of savings, retirement and social care Yvonne Braun says: “Although it is too early to determine how customer behaviour will continue to evolve between now and when the Budget reforms come fully into effect in April 2015, there are still a significant number of savers who will want the regular income provided by an annuity.
“We would expect that many will choose to annuitise later as a result of the new measures.”