This fall in annuity sales comes against a backdrop of the baby-boomers hitting their mid-sixties, as shown below. It would be logical to expect a surge in annuity sales, based purely on this demographic data.

The data also shows that shopping around was worst amongst those with the smallest pension pots. Hargreaves Lansdown is calling on the Treasury to introduce reforms to the small pots ‘Trivial Commutation’ rules in this year’s Budget on 19 March. Tom McPhail, head of pensions research ‘The retirement income market appears to be shifting, with demand for annuities collapsing and surging interest in drawdown. The first wave of baby boomers has passed age 65 but even so, we would expect annuity sales to stay high yet they were lower in 2013 than in 2011, when fewer people were reaching their mid-sixties.

There are lots of factors at work here, including the wider economic background, sentiment about future interest rates and actual retirement ages; low annuity rates in recent years compared to historic averages may have had an impact too. We recommend that every retiring investor should go through the 3Ts: Timing, Type and Terms, to decide when they want to retire, what sort of retirement income they want and finally where they can get the best deal.’