Association of British Insurers (ABI) director general Huw Evans has said the ‘initial dash for cash’ following the pensions freedoms coming into force is subsiding and annuity sales are on the up.
Speaking today, Evans (pictured) told MPs on the Work and Pensions Select Committee that he is beginning to see a shift back in favour of annuities and away from drawdown.
‘In broad terms customers are showing quite a lot of common sense, but it’s still the case that it’s too early to tell. If people are taking too much money too early and are going to run out in 15 years’ time, we can’t possibly know that. It’s also quite difficult to judge tax liabilities,’ he said.
‘That’s a difficult thing to measure but our overall sense is that initial dash for cash is slowing down. We knew there was a pent up demand for people who wanted to liberate small pots; that was never going to provide this sustainable annuity. That’s perfectly logical customer behaviour.’
He added that he has noticed a broad change in the attitudes of people taking their pensions.
‘[Annuities] clearly saw a massive hit when the reforms came in, but I think what’s interesting is an emerging pattern, but it’s too soon to say if it’s definitive, that customers are beginning to go back to annuities a little bit. Our Q4 data shows that there were 21,000 annuities bought in the last quarter of the year, compared to 19,500 drawdown products. I think we are beginning to see this tranche of customers thinking a little more about what the respective merits are.’
However, Joanne Segers, chief executive of the Pensions and Lifetime Savings Association, said that people are still finding it challenging dealing with the new pension system.
‘Savers are finding it difficult to navigate the new pension freedoms. We know that not everyone goes to Pension Wise, those that do like the service they receive. We know that people don’t want to go and pay for financial advice and people are finding it very difficult with the new pension freedoms. Frankly it is very challenging; we are sort of asking people to become their own IFAs,’ she said.
Source: New Model Adviser