More joint life and inflation-linked policies purchased
Total annuity sales reached £7bn in 2004, an increase of 34% year-on-year, according to latest data from the Association of British Insurers (ABI).
Some 89,600 annuity contracts were written in 2024 surpassing last year’s total and reaching a new ten-year high, the body said.
The ABI’s data also showed more annuity purchases occurred after taking financial advice in 2024, with 36% of buyers taking advice beforehand compared to 29% in 2023.
In addition, more people shopped around for their annuity contract – 69% of buyers moved away from their pension provider at the point of purchase. This was up from 64% in 2023, the ABI said.
The number of people buying joint life annuities, that provide for a dependent, enhanced annuities based on health and lifestyle underwriting, and inflation-linked annuities also all increased.
ABI head of long-term savings policy Rob Yuille said: “These figures demonstrate just how valuable annuities are in the mix of retirement products. Buoyed by improved rates, the appeal of a guaranteed income for life can help people achieve financial security in retirement.
“It’s also encouraging to see that more people are taking advantage of professional advice before purchasing an annuity and are exploring the market to find the best income and a type of pension that is tailored for them.”
Hargreaves Lansdown head of retirement analysis Helen Morrissey said: “Annuity sales soared to a ten-year high in 2024, and we can expect 2025 to have got off to a flying start too.
“After years in the doldrums, the market has been kick-started off the back of rising interest rates and soaring gilt yields and this has tempted retirees back to the market.”
Morrissey said the “bond market dramas at the start of the year” may have been unsettling for investors, but they were a “boom time for annuities”.
“The fact that rates have remained high at the start of 2025 bodes well for annuities and means we could see a good chunk of the robust growth of 2024 stretch into 2025 too.”
Royal London pensions expert Clare Moffat said annuities should not be overlooked.
“Nearly ten years ago, the introduction of pension freedoms meant there was a dramatic decline in the amount of annuities sold. This was compounded by low annuity rates for many years. However, the increase in annuity sales in 2024 shows that annuities do have their place,” she said.
“Interestingly, people often say they don’t want an annuity, but when asked what they would like from a retirement income product, they list factors like certainty, simplicity, an income that will last as long as they do, and protection for their dependents.
“This description sounds a lot like an annuity.”
Shopping around for annuities
ABI data also showed more people shopped around for the best annuity for their needs.
“Given that annuities cannot be unwound once bought this is vitally important,” said Morrissey.
“Different providers offer different rates and not searching the market can leave you thousands of pounds worse off over the course of your retirement. Taking the time to use an annuity search engine could save you a lot of money. There’s also evidence that more people are taking financial advice to make sure they get the best deal.
“There’s also increased evidence that people are tailoring their annuity to fit their circumstances with sales of joint life, enhanced and escalating annuities all on the rise.”
Moffat added: “It’s also encouraging to see an increase in joint life annuities and escalating annuities. If you purchased an annuity in 2021, escalating by either CPI or RPI, you will be delighted with the growth in income because of the high rates of inflation.
“If you didn’t choose escalation, you’d be in a very different position as the purchasing power of your income will be reducing significantly. Although this means a lower income at outset, in times of high inflation, they have been invaluable.”
Jenna Brown (Professional Adviser)
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