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Research: One-in-ten savers plan to buy an annuity post-April

Just over one-in-ten people with a defined contribution private or company pension are planning to buy an annuity, according to figures from Yougov.

In a survey of 1,959 British adults for the Sunday Times, Yougov found that 33 per cent were contributing to a DC scheme, while just 5 per cent were members of defined benefit schemes.

Of the DC pension-holders, some 54 per cent said they didn’t know what they would do with their pension fund on retirement.

However, only 11 per cent said they would buy an annuity, while 16 per cent responded that they planned to spend their fund.

Some 10 per cent said they would invest in buy-to-let property, while 8 per cent preferred stocks and shares and 6 per cent specified bonds.

A further 13 per cent said they would pursue other investment options.

Annuities were most popular among those aged 60+, with almost a quarter saying they planned to buy one.

Annuities were most popular among those planning to vote for the Liberal Democrats at the upcoming election. Some 18 per cent of Nick Clegg’s backers said they would opt for the product at retirement, compared with just 8 per cent of Labour’s supporters.

The figures come just over a month ahead of the implementation of new pension freedoms, which will allow savers to withdraw from their pots from age 55.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Just wait until the other eight begin to understand the implications of trashing the wad. I’m willing to bet that well over 5 in ten will still buy an annuity. Apart from logic and risk aversion, there is also the matter of costs and fees.

    Most in the next few years will have old style pensions that will need switching in those that can accommodate the new proposals. That will cost money and reduce the fund. It will be a very brave adviser who will do this – or one with bullet proof PII.

    Then of course there are the fund management costs, the platform costs and the adviser costs – all ongoing – for remaining invested. HOw many will be happy with that I wonder.

  2. The problem I have with these types of surveys is that they often ask the wrong questions to the wrong people.

    Generally speaking most people know very little about annuities or drawdown before they actually retire. It is only after they have done some research or spoken to an adviser that you are able to make an intelligent comment.

    Therefore we should not be surprised if people show a preference for flexible options before they retire. It is only when they start to understand the issues that they can make informed judgement.

    I don’t know the exact nature of this survey but we must be weary of reaching conclusions from these surveys

  3. I have a client who has done his own research and is keen on a Fixed 10 Year Term Annuity that upon analysis only produces a return of 1.77% per annum that when he looked at the figures he thought it was attractive… because it is guaranteed!

    I’m off to the Job Centre!

  4. Victor – my thoughts on fixed term are well known – I am trying to help fill the advice gap by writing about why clients should take advice

    One very good reason is that an adviser will help someone take a longer term view of their income requirements

    I will leave it to better qualified advisers to say whether 1.77% fixed for 10 years is a good deal

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