Nearly one million (990,000) pre-retirees, those aged over 55 and still in work, are considering annuities for the first time in preparation for their retirement, according to research from Legal & General Retail.
One in six people approaching retirement but still working (16%) are looking at the product due to improved rates against the backdrop of rising living costs. This is in addition to the 828,000 (14%) of working over 55s who had always planned to buy an annuity in retirement3.
Aside from the improvement in rates (18%), people considering an annuity are drawn by the stability of a guaranteed income making it easier to plan their finances (78%) and the assurances the product offers in a volatile market (36%).
But there is still a lack of awareness around the product. Of the one in five pre-retirees who wouldn’t consider an annuity (20%), 16% said it was because they believe they offer a bad deal. An additional two out of five pre-retirees (44%) described wanting a guaranteed income for the rest of their lives but only half that number want or are considering an annuity, despite this being exactly what it is designed to achieve.
Legal & General analysis of its own data found that its annuity rates typically increased by around 40% from October 2021 to October 2022, and over 60% since 2016.
Lorna Shah, Managing Director of Retail Retirement, Legal & General Retail: “There’s no hard and fast rule when it comes to deciding how to fund your retirement. What might work well now, may not be suitable for you in 10, 15 or 20 years’ time so it’s really important to remain actively engaged with it throughout later life.
“Despite annuities becoming more popular, we still need more awareness of the flexibility of fixed-term annuities and the benefits of enhanced annuities. Our research shows there’s still a lack of understanding about what an annuity is and what it can offer. This means people risk having an ‘either, or’ approach to funding their retirement, when in fact a blended approach might be more suitable.
“It’s important people are aware of all the options they have and whether a combination of these may present the best outcome. Having this knowledge will ensure people can reclaim their retirement at a time when they might be feeling lost due to financial pressures outside of their control.”
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