Annuity sales continue to plunge

Annuity sales have continued to dive two years after new rules allowed people to cash in their pension pot.

Since 2015, those aged 55 and over have been permitted to withdraw 25% of their pension pot as a tax-free lump sum, and the remainder subject to the normal rates of income tax.

This has led to a fall in the sale of annuities, which offer a guaranteed income for life.

Sales fell by 16% in the six months to April, compared with a year earlier.

The total of 33,561 sales was also 21% lower than the previous six months, according to figures from the City regulator - the Financial Conduct Authority (FCA).

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Some 150,806 pension pots were taken entirely in cash in the six months to the end of March.

This was 8% down on the previous six months, but 9% up on the same period a year earlier.

The move is particularly popular among those with smaller pension savings, with 84% of those accessing a pension pot of less than £10,000 taking the whole lot in cash.

Tom McPhail, of investment firm Hargreaves Lansdown, said that this could store up problems for the future.

"It is clear investors have limited appetite for guaranteed incomes at today's relatively low interest rates. The worry is that for many people, at least some guaranteed income is extremely important, particularly at older ages," he said.

"If this trend continues much further we may not have an annuity market at all and that won't be good for investors."