A number of factors are likely to determine future supply and demand of the decumulation market, as well as the industry’s capacity to continue to secure the retirement income of millions of pensioners.

These are retail trends, institutional and regulatory drivers, pricing issues, as well as supply and demand.

After a period in which annuities have been expensive due to low interest rates and challenging investment conditions, we are starting to see a resurgence in annuity values and consumer interest.

We put this down to higher interest rates, an enhanced focus on security in the wake of the Covid-19 pandemic, and heightened recognition of later-life care needs.

For example, our benchmark for the annual value of a single life, level and no guarantee period annuity for a 65-year-old man with a £100,000 fund stood at £6,283 in August 2022. This compared to £4,696 in August 2016 – an increase of about 15 per cent after allowing for inflation.

Will such increases be enough to stimulate annuity sales after a period in the doldrums?

Possibly, but there are also things that insurers, to some extent backed by governments that want to encourage higher levels of retirement saving, can do to make them more attractive.

One, already common in the UK, is offering the flexibility to allow drawdown in earlier retirement years but, importantly and less commonly, in combination with a facility to allow undrawn funds to continue to attract investment income.

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