Nearly one year on from the introduction of rules designed to revamp the pensions system, annuity sales have bounced back, research out today has found.
The study by the Association of British Insurers (ABI) discovered that 21,200 annuity plans, worth £1.1bn, were purchased during the fourth quarter of 2015, while 61,700 annuities, worth £3.3bn, have been bought since the reforms were introduced.
Meanwhile, just 19,700 drawdown policies were sold in the last quarter of 2015, although 63,600 have been purchased since the pension freedoms were introduced.
In April last year, the pension freedom rules came into force, which allow those aged over 55 to access their retirement savings pot without first purchasing an annuity.
Since last April, £3bn has been paid out in 213,000 cash lump sum payments, making the average amount taken out each time £14,800.
"Following some initial pent up demand, the number of people accessing their pension pot as cash in one go has settled down," said Dr Yvonne Braun, director of policy for long terms savings and protection at the ABI. "People are taking a sensible approach and considering how they will pay for their whole retirement. Annuity sales are beginning to see a revival, with more annuities than drawdown products sold in the last quarter. This shows people still really value a lifelong guaranteed income.
"Our key challenge remains ensuring people save enough for their retirement. With increasing life expectancy and declining final salary pension provision, we must turn our attention to helping customers grow bigger pots."
Last November, the ABI revealed that annuity sales had risen during the third quarter of 2015 to 22,380, which was the first quarter-on-quarter increase for annuity sales in three years.
Meanwhile, last December, government revealed plans to allow those who had already purchased an annuity to sell it on through a broker, in return for a cash lump sum. This secondary market for annuities is set to launch in April 2017.