Commenting on today’s Pensions Policy Institute (PPI) report which shows that 8.5m people could be newly saving in a pension by 2030, Kim Durniat, partner, suggests that auto-enrolment success could be just what the ailing annuity market needs:
“While there is no doubt that the flexibility afforded by the 2014 Budget will lead to fewer individuals buying annuities, the success of auto-enrolment could be the lifeline that insurance providers and the wider annuity market are looking for. The PPI’s report is promising in that it shows that the number of individuals saving into a DC pension could double by 2030. Even though a lower proportion of individuals might choose to annuitise their pot, there will likely be a far greater ‘pool’ of pension pots that could potentially choose to purchase an annuity. It may be attractive to draw everything from a pension pot out at once but there will always be those who are attracted to the promise of a guaranteed lifelong income.
It is still early days since the Budget announcement earlier this year, but already insurers themselves are coming back fighting; by developing a raft of new products to meet changing retirement needs, such as fixed-term annuities, surrenderable annuities and drawdown products.”