Market volatility boosts annuities

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.

In October 2015, following the global turbulence, preference for guaranteed income was up to 47%, compared to just 33% when pensions freedoms were introduced, and preference for flexible income was down from 54% in April 2015 to 42%. 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, 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 Pension Freedoms Index from eValue is based on the preferences of consumers who use their online forecasting tools. At present, these calculators, which are used by a number of eValue’s pension and investment provider clients, monitor the day by day retirement intentions of thousands of investors.

Further analysis of the data finds that consumers are flocking to these online calculators in their hundreds to assess their future finances every time government and industry news hits the headlines. When the state pension top-up scheme was launched by the government in October and there was lots of media coverage, the volume of people logging onto the calculators saw a surge – up over 10 fold in two days.

Bruce Moss, Strategy Director at eValue, comments on the data: "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."