View more on these topics

Drawdown continues to eat into annuity sales

Drawdown sales have more than doubled year-on-year, while new annuity business has crashed 64 per cent, latest ABI stats show.

Over 11,000 drawdown contracts were sold in Q4 2014, a rise of 109 per cent year-on-year, compared to just 5,482 in the same period in 2013.

However, annuity sales continue to decline. Sales fell 27 per cent between Q3 and Q4 2014, from 39,246 contracts sold down to 28,712. This is a 64 per cent decrease year-on-year, with some 80,537 annuities sold in the last quarter of 2013.

People with smaller pension pots are more likely to abandon annuities and move into drawdown, the stats show.

The average pot size for an annuity increased 27 per cent year-on-year, from £33,000 to £41,900, while the average pot size for drawdown fell 37 per cent, from £91,400 to £57,600.

Some 62 per cent of annuities sold were to internal customers in Q4 2014, up from 52 per cent a year ago, meaning external annuities are bearing the brunt of the slowdown in annuity purchase.

Enhanced annuities’ share of the market remains flat, at 28 per cent of sales.

ABI retirement policy manager Rob Yuille says: “These figures show savers with larger pension pots continuing to buy annuities, while others are entering drawdown with smaller funds than in the past.

“More people are clearly taking cash, but many are still making an active choice to buy an annuity with a small pot. This reflects the diverse needs and preferences of the population and is a reminder that savers should not be pigeon-holed or told their choices are wrong, but need advice or guidance to help them find the right solution for them.”

Recommended

Clock money 620 x 430
3

MP warns protection damaged by ‘toxic’ reputation

The chairman of the All-Party Parliamentary Group on insurance and financial services has warned that income protection take-up is being damaged because the word itself is “toxic”. Conservative MP for Cardiff North Jonathan Evans says two-thirds of products sold are taken out by employers on behalf of their staff, while total penetration is estimated at […]

FSCS-office-alt-500x320.jpg
11

Advisers criticise FSCS over ‘unfair’ Sipp stance

The Financial Services Compensation Scheme’s decision to levy advisers for investment failures as part of claims about Sipp advice has been branded “unfair” by the industry. In an update last week, the FSCS said it will start paying compensation for losses in the value of investments held in Sipps, as part of claims about advice […]

Bellamy-David-2012-700x450.jpg
16

SJP moves into banking as distribution arm posts £11m loss

St James’s Place has announced it is launching a banking service powered by Metro Bank, as its distribution arm posts a £10.9m loss for 2014. In its annual results, published today, the wealth manager says it is to introduce a “fully functional” banking service, allowing clients to pay in cheques and use debit cards, and […]

Toby Strauss, Scottish Widows
9

ScotWids plans £10k minimum for non-advised drawdown

Savers with more than £10,000 in their pension pots will be able to enter into a Scottish Widows drawdown contract without an adviser, chief executive Toby Strauss says. In July last year, Money Marketing revealed Scottish Widows was planning to launch a simplified drawdown product. Now the provider is firming up its offering. Customers with over £10,000 will […]

Time to stop the salami slicing on tax relief

Steve Webb  – Director of Policy and External Communications As the Autumn Statement approaches, Steve Webb calls for the Government to stop tinkering with tax relief. Twice a year, in the run-up to the Spring Budget and the Autumn Statement, we face a torrent of speculation as to what changes the Chancellor might make to […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment