Turbulence driving consumers back towards annuities – eValue

Bull/Bear marketMarket turbulence is driving consumers towards guaranteed income, with consumer preferences shifting back to the safety of annuities since pension freedom day in April 2015, new research from eValue shows.

Latest figures from eValue’s quarterly Pensions Freedom Index show that since April 2015 savers have gradually reverted back to the safe haven of annuities.

In October 2015, following the global turbulence, preference for guaranteed income was up to 47 per cent, compared to just 33 per cent when pensions freedoms were introduced. Preference for flexible income was down from 54 per cent in April 2015 to 42 per cent in October. If the current market uncertainty persists, we may see another peak in the popularity of annuities on the anniversary of pension freedoms in April.

The data sample of over 17,000 people shows that market volatility has a big influence on the relative attractiveness to consumers of annuity and drawdown with the turbulent markets of late August and September driving the attractiveness of annuity to its highest point since the arrival of pension freedoms.

The data, which comes from analysis of the 17,000 consumers who have used eValue’s online forecasting tools, shows that there was a swing against the trend and towards drawdown as the preferred means of delivering retirement income during the relatively quiet markets in the last quarter of 2015.

The research is based on the preferences of consumers who use eValue’s online forecasting tools. These calculators are used by a number of pension and investment providers.

EValue says the launch of the state pension top-up scheme in October and saw a 10-fold increase in usage.

EValue strategy director Bruce Moss says: “Insight like this helps advisers and providers to anticipate when clients or potential clients will be engaged and looking for help and advice.  The industry should use this intelligence to tailor its proposition to investors worried when markets are volatile and should capitalise on consumer engagement each time there is a government announcement and pensions hits the headlines.”