30th May 2014
Well over half of Hargreaves Lansdown’s pension investors have delayed taking out an annuity due to the Budget reforms. Hargreaves Lansdown surveyed 1531 pension investors this month with 56.7% saying they had delayed buying an annuity because of the budget while 79.8% say they will wait until further details are announced before making a decision.
However 94.2% say that a secure income is still quite important (38.6%) or very important (55.6%).
Tom McPhail, head of pensions research says: “Retiring investors want clarity and certainty, both in terms of the rules governing their retirement income and in terms of their income payments themselves. This suggests reports of the annuity’s demise may have been greatly exaggerated. Some investors do now see drawdown as a more attractive option however it is not a risk free solution. We anticipate more and more investors will opt for a combination of an annuity to provide them with some security and a drawdown plan for flexibility.
“It is important to remember that for all the poor publicity around annuities in recent years, for the right people, at the right time and provided they shop around for a competitive rate, annuities can still be a very good solution. If you have a private pension, an annuity is the only option that can provide a guaranteed income for life.”
The firm adds that 60.7% of clients in April 2014 qualified for enhanced incomes due to health or lifestyle. These are people buying annuities voluntarily, despite the Budget announcements, says the firm. The most common condition resulting in an enhancement for annuities was high blood pressure affecting 42.88%. Of those already in flexible drawdown with Hargreaves Lansdown, only 6.3% take the whole lot in one go.