SALES of retirement annuities have plummeted by more than one third as the Government's pensions revolution has paved the way for a lower take-up of the products, figures from insurers show.
Some 46,368 annuities worth £1.8 billion were sold in the second quarter of this year, marking a 37.5 per cent fall on the first quarter of 2014, according to data from the Association of British Insurers (ABI).
The ABI said that pension flexibility changes announced in Chancellor George Osborne's Budget in March "meant fewer people bought annuities, although there was already a decreasing trend in sales".
The average size of an annuity pot is also bigger, as more people with smaller retirement pots are cashing them in following the changes announced in March, the ABI said.
The average pot used to buy an annuity was £38,600 in the second quarter of this year, up from £33,400 in the first quarter.
When many people retire, they use their pension pot to buy an annuity, which gives them a guaranteed yearly income. However, annuities have been controversial in recent years due to disappointing rates and concerns over people not shopping around to get the best deal.
Mr Osborne announced a huge pensions shake-up in the Budget, with the intention of people no longer feeling forced to use their pension savings to buy an annuity. From late March, the overall amount of pension wealth people can take as a lump sum has been increased from £18,000 to £30,000. This wiil create a potential tidal wave of activity.
The size of a small pension pot that someone can take as a lump sum, has been increased from £2,000 to £10,000. From next spring, people aged 55 and over will only pay a marginal rate of income tax on withdrawals.
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