Majority of pensioners do not want to cash in their annuity

• 55% would not want to sell their annuity for any reason
• 48% said they value the certainty of receiving set income for life 
• 40% believe there is a high risk they could end up worse off by cashing in

The majority of British pensioners have no plans to cash in their annuity, according to a YouGov survey commissioned by the Institute and Faculty of Actuaries (IFoA) in June 2015.  The survey, conducted with people aged over 55 with an annuity, found that 48% of respondents value the certainty their annuity gives them, and 40% believe there is a high risk they could end up worse off by cashing it in.

The main reason pensioners would consider cashing in their annuity would be because they had other pension income (10%), followed closely by not wanting an annuity in the first place (9%).

The survey was commissioned as part of the IFoA’s response to the Government’s call for evidence on creating a secondary annuity market.

Gareth Connolly, Chair of the IFoA Pensions Board comments: 

“Although the freedom to decide how and when to use their pension assets is attractive to some pensioners, giving up a guaranteed income could increase the risk of running out of money later in retirement, especially given that individuals may underestimate how long they will live.  This could cause both individual financial hardship and an increased burden on the State benefit system - both of these outcomes could have a detrimental impact on the long-term sustainability of the new pensions framework.

“It remains to be seen how much demand there will be in practice for buying secondary annuities once the market has developed, and whether they will be good value for pensioners.   As the YouGov survey demonstrates, annuities will continue to play an important role in the pensions market as people value the certainty they provide..

“Access to adequate financial advice will be vital for pensioners in understanding the pros and cons, and the inherent risks, relating to the new option they will have available.  Many annuitants will likely be amongst the most vulnerable in society.  It is therefore crucial that the implications of choices are fully understood and that consumer safeguards are in place to to reduce the risk of mis-selling.”

~ENDS~

For further comment or to answer any questions that you may have please contact Annette Heninger, Media Relations Manager at the IFoA, on 07525 592 198 or by emailing annette.heninger@actuaries.org.uk

Editorial notes:

About the YouGov Survey 

All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 1531 adults over 55, of which, 348 had an annuity they were currently receiving payments from. Fieldwork was undertaken between 10th-12th June 2015.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body. 

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest.  

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.

Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.