Lucie Spencer, director – financial planning at Evelyn Partners, says: “Annuities give clients the peace of mind knowing that they have enough income coming in at retirement and they’re not going to worry when they see on the news that markets have fallen.
"They can also have guarantee periods or increases in line with inflation attached to them, giving the clients the reassurance that their funds will increase as they see their bills doing so.
“The comeback has mainly been related to the rise in interest rates and the fall in gilt yields, therefore clients are now getting more for their money. The increase with inflation as well has seen clients become more nervous when they are on a set income and again an annuity can give them peace of mind."
But Spencer notes: “Annuities, however, are not for everyone and therefore receiving tailored advice from a qualified financial adviser is imperative to ensuring that the right approach is taken for the individual.”
There are clients who will be attracted to the guaranteed income aspect of annuities, but they may also want some flexibility.
M&G's Anderson says: “Generally, most clients will want to know that they will always have enough in retirement to cover their essential income.
"The state pension will go some way towards this, but may not cover it all, and this is where there can be benefit to a ‘blended’ approach where the client knows they will receive a guaranteed level of income through an annuity – in addition to their state pension – to ensure that their essential income level is met.
“By having the ability to leave the rest of the client’s pension invested, which can be for a decent period of time given average life expectancy, it allows for continued investment returns on their pension savings to provide for lifestyle and discretionary income retirements or to leave a legacy for their family. “
According to Royal London's Corliss, retirement will depend on an individual’s needs and while annuities are not for everyone, there are different scenarios to think about where they could be beneficial, so they should be considered as part of the retirement planning process.
He adds: “Many want complete flexibility with their retirement income, which explains the popularity of drawdown, while for some, buying an annuity offers them the comfort of a guaranteed income.
“As people get older some are keen to introduce some form of guarantee, so a happy medium for many is an annuity to cover basic living costs that can provide comfort and reassurance, while leaving the rest invested, which will offer that extra flexibility.
