“However, we’d like to see more people taking advantage of professional advice and new forms of targeted support for consumers to ensure they can enjoy the best possible retirement.”
Level-only annuities, which pay the same income every year but can be vulnerable to inflation, remained the more popular version of the product, at 82 per cent of the total number sold.
This type of annuity has a higher starting income than an escalating annuity - which provides an income that increases every year.
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said: “Annuities should always be part of the discussion when you need a level of guaranteed income in retirement but their reputation for being inflexible and offering poor value for money put many people off.
“However, as interest rates soared so did annuity incomes.”
In the aftermath of the mini-Budget, annuities hit a peak of £7,586 per year for a 65-year-old with a £100,000 pension, according to data from HL’s annuity search engine.
They have since pulled back a little – the same person can get up to £7,117 – but they still offer good value so HL said it expects interest to remain high.
Meanwhile, figures published last year by the Financial Conduct Authority in its flagship consumer survey ‘Financial Lives’, found half of annuity buyers did not compare deals.
Around 50 per cent of annuity buyers did not compare rates to find the best provider and more than half (52 per cent) did not know disclosing poor health could result in higher rates.
“These high numbers raise concerns about the level of support retirees are receiving – this is the closest thing in the financial world to being given ‘free money’,” Lowe added.
However, Morrissey argued that the other high point in the recent HL data was actually that around two-thirds of people shopped around, rather than just going with the quote their pension provider gave them.
“This is good news and shows people are looking for the best deal.”
sonia.rach@ft.com
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