Annuity Sales Tumble

Annuity Sales Tumble.

The Chancellors Budget in March 2014 has sparked a dramatic fall in annuities being taken out as a retirement option.

Budget 2014 allowed for full flexible drawdown from 28 March 2014 for all those who already had guaranteed pension income, including state pensions, of £12,000 pa.

From April 2015, all people looking to take benefits will be allowed to use flexible drawdown pensions rather than using having to buy an annuity.

What is Flexible Drawdown

• Your can still withdraw 25% of your pension fund as a tax free lump sum.
• The balance does not have to buy a taxable annuity income.
• Your can with withdraw as much or as little as you need from your pension fund balance as a taxable income.
• You can still buy an annuity at any time.

Dramatic Sales Fall

Already we are seeing many traditional annuity providers offering huge incentives to attract annuity work.  It does not seem to be working, Indeed, Standard Life has this week confirmed a dramatic fall in its annuity business of around 50%.  They did not publish their no doubt increased drawdown figures.

Comment

You can keep withdrawing until it is gone.  There is a concern that we will all rush out and but sports cars.  We suggest this will not happen.  The UK public are not fools we know that we much manage our money, but with annuity rates being so low, many were not saving in pensions anyway, as the break-even point on a 5% annuity is 20 years.  Why would you wait 20 years just to get your more back let alone some extra?    Annuity providers are going to have to make retirement products more flexible and more attractive if they are to attract the low risk pension saver again.