Radical pension reforms announced in this year’s Budget caused enhanced annuity sales to plummet by almost a third, according to Towers Watson.
In his Budget speech, Chancellor George Osborne announced savers would be able to take their entire pension pot as cash from age 55 without paying a 55 per cent penalty tax charge.
Towers Watson says in Q2 this year, the first full quarter since March’s Budget, enhanced annuity sales fell 29 per cent from £847m to £600m, while year-on-year annuity sales were down 34 per cent.
Although sales are falling, Towers Watson says in the past year the average pension being used to purchase an enhanced annuity has risen from £47,000 to around £50,000.
Enhanced annuity sales have risen steadily since 2001, when the market was worth £420m. By 2012 it was worth £4.5bn.
Towers Watson consultant Evelyn Gutteridge says: “For many consumers, annuities will continue to play an important roles in offering straightforward way of drawing retirement income in a way that insures against the risk of outliving their savings.
“We therefore anticipate that annuities will continue to be an important part of the retirement landscape, albeit at a lower level.”