Two thirds now choosing drawdown over guaranteed annuities

By comparison just 41% are looking to purchase a guaranteed annuity according to the latest research conducted from April-August by Selectapension, the pension and investment software provider.

As retirees turn to flexible investment backed solutions following the introduction of the pension reforms, 39% of Advisers are now actively selecting funds on behalf of their clients, with 2% outsourcing to discretionary fund managers (DFMs). This shows Advisers are beginning to make more proactive investment selections. However, 39% of Advisers are still selecting default funds for their clients, which may not be the most appropriate strategies for their clients in light of the pension reforms.

In addition, data from Selectapension also reveals the funds which are currently the most popular through the Flexible Retirement Optimiser tool, which helps to calculate clients’ most suitable retirement income through drawdown, annuities or a combination of both. The retirement planning software provider found that the Vanguard US Equity Index is the most popular fund Advisers are currently selecting, followed by Jupiter Strategic Bond and Old Mutual UK Alpha funds.

Andy McCabe, Managing Director, Selectapension commented:

“Following the pension reforms, more people are looking to review their retirement options, and the flexibility offered by drawdown is becoming more attractive as annuities are slowly losing their lustre as the most popular investment choice.

“Whilst it’s positive to see proactive Adviser investment selection, it is worrying that a significant proportion of clients continue to have funds in the default investment selection. Inertia can be costly. Default funds may no longer be appropriate or the best option in the light of the new reforms, therefore it is vital for Advisers to educate their clients, to ensure they understand what the most suitable investment solution is for them.”