The data from eValue reveals that over half (54%) of consumers preferred flexible income in retirement initially after the freedoms, compared to just a third (33%) opting for the guaranteed income of annuities in April 2015.
However, market fluctuations and headlines about the outlook for the global economy took their toll on the preference for flexible, with consumers increasingly opting for annuities. By October 2015, annuities overtook flexible income as the preferred consumer choice, with almost half (47%) opting for guaranteed income over flexible income or cash.
At the first anniversary of Pension Freedoms, flexible income was once again leading consumer preference but only by 5%.
The data also found that those with smaller pension pots prefer annuities and cash but, as the pension pot size grows, the preference for flexible income begins to dominate. Two thirds (68%) of those with more than £150,000 in their pension pots prefer flexible income options, compared to just two fifths (40%) of those with a pot size of less that £50,000.
The data also highlights the cautious nature of millennials, with twenty- and thirty-somethings more likely to opt for annuities than their parents’ generation.
Bruce Moss, Founder & Strategy Director of eValue, said:
“The first year of Pension Freedoms has shown once again the innate caution of the British public. Predictions of the death of annuities have turned out to be wide of the mark, as have concerns that retirees would cash out their pension funds to splurge on Lamborghinis.
“A clear finding from the first year of the Pensions Freedom Index is the increase in popularity of annuities every time there is a period of volatility in equity markets. In the run up to the referendum (and if Brexit does happen), don’t be surprised to discover that annuities become the most popular option for retirees.”
