Despite the blow dealt by the UK Budget to the sale of annuities in the latter part of 2014, they will continue to form a key part of retirement picture once the immediate attention dies down.
In the 2014 UK Budget, changes were made that meant that, from April 2015, the rules that have effectively restricted the use of personal pension pots will disappear.
The effect of this on the annuity market has, in the short term, been quite dramatic. The market feared that a substantial proportion of the £12 billion a year that is placed in annuities would be lost, as well as the resulting loss of new business value, which for some UK life insurers equates to more of 50% of total new UK business value.
While the number of annuities sold has declined since the announcement, the longer term may be more positive. When asked what they want for their retirement planning, savers say: a desire for security, protection against inflation and some certainty in old age –the very definition of an annuity. So, it is likely that while the products may evolve and there will be some rebranding, the picture is actually more encouraging than some might suggest.
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