Why gross sales of pension annuities are on the rise

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Your help makes all of the distinction. Learn extra New information reveals a big surge within the worth of retirement annuities, with the typical quantity invested now exceeding £80,000 for the primary time.

The Affiliation of British Insurers (ABI) has revealed a notable enhance in gross sales of annuities valued over £250,000 and £500,000.

Annuities supply people a approach to convert their pension financial savings right into a assured mounted revenue all through retirement, offering monetary certainty.

The ABI indicated that the full worth of premiums paid into particular person pension annuities rose by 4 per cent yearly, reaching £7.4 billion in 2025.

This marks the very best annual degree because the introduction of pension freedoms in 2014, which granted folks better flexibility over their pension pots.

Prior to those reforms, people with an outlined contribution (DC) pension have been usually required to transform their retirement funds into an annuity.

Nonetheless, the freedoms allowed for a broader vary of decisions relating to how pension financial savings may very well be utilised, following earlier controversies the place some people obtained disappointing annuity incomes.

Regardless of a slight lower within the general variety of annuities bought, the ABI attributes the rise in complete worth to people committing bigger pension pots to safe a lifelong revenue.

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Annuities supply people a approach to convert their pension financial savings right into a assured mounted revenue all through retirement, offering monetary certainty (Gareth Fuller/PA Archive) Gross sales of annuities over £250,000 rose by 31 per cent yearly, and gross sales of annuities valued at over £500,000 rose by 54 per cent, the ABI stated.

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The rise in greater annuities pushed up the typical annuity worth to £84,000, passing £80,000 for the primary time, it added.

The upper worth of premiums has gone alongside an 8 per cent annual rise in folks aged 70 and over shopping for annuity – suggesting that folks in later life are on the lookout for stability whereas benefiting from the beneficial charges accessible to them, the ABI stated.

Folks with well being points which may imply a decrease life expectancy might be able to get an enhanced annuity, which pays out a better price.

The ABI stated that it has seen a development in escalating annuities – merchandise that enhance funds every year – suggesting extra prospects are on the lookout for safety in opposition to the erosion of revenue over time, together with by means of inflation-linked choices.

Rob Yuille, assistant director, head of long-term financial savings on the ABI, stated: “A placing function of this yr’s information is the rise within the measurement of pots being annuitised, paired with folks selecting to safe an everyday revenue at older ages.

“It’s at all times been a good suggestion to ‘flex then repair’, utilizing financial savings flexibly in early retirement, then locking in a assured revenue at greater charges when certainty issues most.

“Now, with pensions coming in scope of inheritance tax from April 2027, selecting an annuity means a assured revenue for all times, with the choice of offering for family members with out worrying about doubtlessly penal tax impacts.”

<img src="https://static.independent.co.uk/2026/01/07/12/26/iStock-2176972477.jpeg" srcset="https://static.independent.co.uk/2026/01/07/12/26/iStock-2176972477.jpeg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2026/01/07/12/26/iStock-2176972477.jpeg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="The ABI said it had seen a growth in escalating annuities" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

The ABI stated it had seen a development in escalating annuities (Getty/iStock) David Cooper, director at retirement specialist Simply Group, stated: “There's a clear shift on the higher finish of the marketplace for savers with bigger outlined contribution pots to prioritise safety and lock in predictable revenue streams.”

Sir Steve Webb, a former pensions minister who's now a companion at pension consultants LCP (Lane Clark & Peacock) stated: “There isn't any doubt that annuities are having fun with a renaissance, notably on the greater finish of the market and amongst those that take monetary recommendation.

“The bounce again of annuity charges from the all-time low ranges seen within the 2010s has introduced annuities again into favour, and the newer resolution to incorporate pensions within the IHT (inheritance tax) internet from April 2027 has added additional impetus.

“Some savers are little doubt planning to mix a big annuity revenue with different retirement revenue to generate ‘surplus’ money which they will reward regularly to their heirs.

“Such items can doubtlessly qualify for an IHT exemption below the foundations round gifting from surplus revenue. Nonetheless, anybody planning such a method must take good recommendation and maintain good data to make sure that these items qualify below the fairly strict HMRC guidelines.”

Carolyn Jones, retirement director, Scottish Widows, stated: “Extra persons are selecting annuities as a result of they need better certainty in an unpredictable financial local weather.

“A assured revenue for all times provides them actual reassurance, eradicating the concern about how lengthy their financial savings have to final or how markets would possibly transfer over time.

“We’re seeing extra prospects put bigger pension pots in the direction of annuities as they search for lengthy‑time period stability, and the ABI’s newest figures inform a really comparable story.

“With extra folks now relying on outlined contribution pensions, assured revenue is changing into a way more central a part of how they plan for a safe, snug retirement.”