Following the Chancellor’s changes to inheritance tax, the financial industry is reporting a surge of interest in pension annuity sales.
If you are retirement planning in Oswestry or Cheshire, you may be interested to know the average pot now exceeds £80,000, after a ‘record breaking’ 2025. Sales over the period were up 4% to £7.4 billion.
An annuity typically converts someone’s pension pot into long term regular, secure income following payment of a life insurance lump sum. Traditionally seen as offering poor value returns, annuities have become popular following the changes to inheritance tax announced in 2024, which pulled defined contribution pensions into the IHT net.
As a result of these changes, pension savings deemed to be ‘unused’ are taxable if they fall outside the inheritance tax threshold. These funds refer to pension pot money not used to obtain an income. As a result, annuities are much more attractive now than they would have been in the past.
Recent data published by investment firm Fidelity International found that a healthy 66-year-old with access to a £300,000 pension pot might find a deal offering 7.5% by purchasing a single-life annuity for £22,440 a year. This figure is a significant improvement on the rates of 4% to 5% on offer five years ago, which would have delivered approximately £13,500 from an identical pot.
The Association of British Insurers (ABI) said there was a notable increase in people using annuities for IHT planning. Annuities this year are predicted to record their highest sales since the “pension freedoms” introduced in 2015. The ABI said the higher value of premiums reflects an 8% rise in the number of people aged 70 and over looking for stability in later life.
