Advised sales of annuities were up 11.3 per cent in the first three months of the year compared to the last quarter of 2014, despite annuity rates falling to their lowest level in two years.
Iress analysis of over 150,000 advised annuity sales found the average single life annuity rate was 4.86 per cent in the first quarer of the year, down from 4.89 per cent in the previous quarter – the lowest level since June 2013 when the report was first compiled.
In addition, there was a 75 basis point spread between the best and worst annuity rates available in March. The average best rate was 5.2 per cent and the worst was 4.45 per cent.
Iress says for the average advised pot size – £64,036 – this means a difference of £12,500 over 25 years.
In March, the average annuity purchased was £3,112, down from £3,369 in February.
The report also shows a rise in the proportion of enhanced annuities sold. In the three months to April, 35 per cent of all annuities sold were enhanced, compared to 30 per cent in the previous quarter.
Iress commericial executive general manager Dave Miller says: “Annuity rates are heading in the wrong direction to stimulate a sustained revival in demand, as retirees face almost unprecedented options in retirement.
”Providers have been cautious in the run up to the new freedoms taking hold, waiting to see how consumers are reacting, and while we have seen some innovation, the real flurry of flexible products has yet to materialise. This competition, in concert with rising gilt yields, should place upwards pressure on rates as the year progresses.”