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Struggling pensioners increasingly gambling on the stock market

Steve Wilkie

Annuity sales falling dramatically among retirees with smaller pension pots. Meanwhile, purchase of annuities worth more than £100,000 increase. Poorer pensioners are the ones gambling most with pension freedoms leaving them acutely vulnerable to a downturn, new analysis reveals. Contributor Steve Wilkie, Managing Director – Responsible Life.

Pensions freedoms, which were introduced in April 2015, mean that, instead of buying an annuity that offers a guaranteed income during retirement, pensioners can leave their money invested in the stock market. 

That is riskier, as has been shown in recent months with big loss and those with smaller pension pots have less of a safety net should wealth dry up. However, it is the purchase of smaller annuities that has collapsed. The number of annuities bought with a value between £10,000 and £50,000 have plunged by more than a quarter in just two years, analysis of the latest official FCA data on annuity shows1.

In the six months to March 2018, sales of annuities worth between £10,000 and £30,000 were 26.8 percent down to 9,143 in just two years. Sales of annuities worth between £30,000 and £50,000 had also plummeted 27.7 percent to 6,243. 

Meanwhile sales of annuities worth significantly more – have risen. Those worth £100,000 to £250,000 increased 7.3 percent in that period while those worth more than £250,000 rose an incredible 45.9 percent.  

Steve Wilkie, Managing Director of Responsible Life, said: “This is a wake-up call for the government. Sales of annuities have gone off in vastly different directions at either end of the spectrum. 

“It is only a matter of time before a great many poorer pensioners who abandoned annuities in favour of riskier bets on the stock market come unstuck. Many retirees will be launching themselves headfirst into financial difficulty because they took a risk with what little they had.”

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