Amongst its general findings, the PPI reported that the timing of an annuity purchase can affect the price, and that those with supplementary incomes may benefit from taking a guaranteed income in mid- or late-retirement.
Those who would benefit from taking an annuity earlier in retirement include individuals who are using all their income to meet their needs, or who are more likely to have variable needs later in retirement, whether because they are renting, are financially dependent on other household members, or have no plans regarding funding care.
Their options are purchasing an escalating annuity early in retirement, or waiting to purchase a level annuity in mid-retirement.
The report also found that the market is responding by increasing the development of products that offer flexible drawdown with embedded guaranteed income elements, while there are further product designs to be found elsewhere in the world - such as variable, deferred, fixed and built-in annuities - that could better meet individual needs were they to be introduced in the UK.
Retirement Line’s director of propositions Mark Ormston said: “There has been a lot of focus on the ‘at retirement’ stage, but people’s circumstances and income needs change throughout retirement.
"I am hopeful that this report will assist with the conversations being had concerning potential pension income frameworks, default journeys and how we best support people throughout the whole of their decumulation journey."
He pointed to Financial Conduct Authority data showing the number of annuities purchased from the age of 75 has doubled in the last five years, calling on providers to “review their offerings to ensure there is not only a functional, but a competitive annuity market delivering value to people looking to annuitise in their 70s and 80s”.
Members need support
The increasing range of needs means individuals will require much more support to make the optimal decisions, a number of experts have argued.
Standard Life’s managing director for individual retirement solutions Claire Altman said: “As we know, decision making is seldom rational. The report reminds us how true this is when people are making retirement decisions.
"It highlights that - for understandable reasons - people often underestimate their own life expectancy and the possibility of cognitive decline, which leads them to full drawdown rather than incorporating an element of annuitisation, which may well be more appropriate.”
She added that the potential for “bad outcomes” means that “guidance and advice are crucial,” citing research showing that only a fifth of 50-64-year-olds have spoken to a financial adviser about their pension, “highlighting the widely known advice gap”.
Hymans Robertson partner Kathryn Fleming likewise pointed to the need for support among a list of actions the industry should take in response to the PPI’s findings.
