Annuities firmly out of favour with UK public
Most people in the UK would not convert their pension savings into an annuity if they were not compelled to do so, according to research by pension consultants Watson Wyatt.
Watson Wyatt questioned more than 3,500 people aged between 50 and 64. It found that a clear majority, 60%, said they would not annuities their savings if they had a choice.
The most common reason for the dislike of annuities was the lack of flexibility. Three in four people (74%) said they wanted more flexibility than an annuity provides. Others said they did not trust the insurance companies that provide the annuities.
Even among those who would choose to annuitise their pension savings, a majority (60%) said they would prefer to annuitise earlier rather than later
"We had expected that the improved rates of conversion of funds into income at later ages would have persuaded consumers to defer annuity purchase," said Mike Wadsworth, a partner at Watson Wyatt and co-author of the research. "But these responses may indicate a concern over loss of value on premature death."
Wadsworth said the findings show low regard among the public for the positive features of annuities such as security and sustainability of income. They also show that people in good health, with higher educational attainment and with higher incomes are more likely to annuitise than people who are less well educated, living on low incomes and in poor health.
Wadsworth commented: "It will come as little surprise that a substantial core of potential retirees are hostile to annuities. What this research has sought to discover is why and to what extent there are variations in attitudes and preferences."
The Watson Wyatt research report ‘Who Would Buy an Annuity?’ can be found at www.watsonwyatt.com/annuities