The proportion of savers buying an annuity at retirement has doubled over the past three years, Standard Life has revealed.

At the PLSA Annual Conference, Standard Life head of retirement proposition, Esther Hawley, quoted Standard Life’s recent findings that annuity rates have increased by 20 per cent in the year to June, and by almost 50 per cent since the start of 2022.

As a result, “we are absolutely seeing that come through in the amount of people who are buying annuities”, she said.

“It is still quite a small proportion, we are starting from a small base, but three years ago to now, it has doubled from what we were seeing before, in terms of the proportion of our workplace members who are getting an open market annuity at time of retirement, as opposed to doing anything else,” Hawley explained.

While “this is certainly driven by the improved rates”, she also noted that “we are starting to see larger defined contribution (DC) pot sizes coming through”.

“We know that as time goes by people will have had DC savings for longer and we will start to see larger DC pots come through that people will be able to do more with at retirement rather than simply cashing it in to sit on top of their DB pension,” Hawley said.

As a response to the growing popularity of annuities, in September, Standard Life announced the launch of its new individual annuity offering, the Standard Life Pension Annuity.

It is aimed at customers aged between 55 and 75 who are looking for a guaranteed income for life from their pension savings. Available through both advised and non-advised routes, the annuity is fully medically underwritten, designed to help ensure those suffering from lifestyle and/or medical conditions get more for their money, as well as for people who are in good health.

Commenting at time of launch, Standard Life managing director for individual retirement, Claire Altman, stated: “It is an exciting time to be launching a new guaranteed income product on the open market.

"I think people are beginning to see [the value of annuities], with the first quarter of this year proving to be the highest quarter for annuity sales since the pension freedoms… We believe guaranteed income has an important role to play as part of a wider toolkit of solutions that can help people manage their retirement savings and delivers certainty together with flexibility and potential growth.

"The Standard Life Pension Annuity has been launched with this in mind, amid growing awareness of how guaranteed income can complement other retirement solutions.”

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