New pension rules coming into force in April are already having an effect, as employers are dogged by uncertainty regarding their employees’ intentions on reaching retirement age.
The changes, announced in the March Budget, will allow people aged 55 or over to take the whole of their pension pot as a cash lump sum. Currently, although people don’t have to buy annuity with their pension pot, most are not allowed to withdraw it all as a lump sum.
Figures published on Thursday by the Association of British Insurers show that sales of annuities fell by over a third in the three months after the Budget announcement alone.
A survey by professional services company Towers Watson shows employers are unsure what retirement options their employees will choose.
Senior consultant Will Aitken said: “Clearly, a lot of companies are preparing for employees to explore alternative income options once they reach retirement, but the picture is still very mixed from company to company. That uncertainty is to be expected.”
Further research reveals that incomes offered to retirees looking to purchase an annuity have also already started to decline, particularly for people with smaller pension pots.
“It’s interesting to see the varied impact the Chancellor’s Budget has had on annuity rates, depending on the size of a person’s pension pot,” said Mr Aitken.