2025
9
UK Annuities and Income Drawdown Market Report 2025
2025-12-15T12:01:30+00:00
REP81474599_2195_4D59_AAA9_6DAB65CE01F0
2195
189622
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Report
en_GB
Sales of annuities grew by a quarter in 2024, reaching a post-pensions freedom high. New annuity sales are expected to continue to grow, with 60% of DC pension owners seeking…
UK
Retirement and Pensions
simple

UK Annuities and Income Drawdown Market Report 2025

"Consumers remain concerned about the value of their pension savings. While guaranteed income options are popular, rising demand for flexibility in tough economic times opens up innovative opportunities."

Lewis Cone, Associate Director - Financial Services

Lewis Cone, Associate Director - Financial Services

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  1. EXECUTIVE SUMMARY

    • What you need to know about annuities and income drawdown
    • Outlook for annuities and income drawdown
    • Opportunities
    • Improve product understanding among pre-retirees to enhance retirement income levels
    • Nudge younger DC pension savers towards advice to ease rising concerns
    • Clearer pension funds information will improve savings decision-making
  2. THE MARKET

    • Annuities market size and forecast
    • Pension annuity market size and forecast
    • Annuity sales surge in 2024, with growth expected to continue
    • Level-only and single-life annuities form the majority of the market
    • Graph 1: breakdown of annuity sales, level vs escalating, 2020-24
    • Graph 2: breakdown of annuity sales, single life vs joint life, 2020-24
    • Annuities market segmentation
    • External annuity and advised sales rise for third consecutive year
    • Graph 3: annuity sales, internal vs external, 2020-24
    • Graph 4: annuity sales, by sales channel, 2020-24
    • Annuities sales distribution channels
    • Changes to IHT and a desire for guaranteed income will sustain annuity sales growth
    • Graph 5: market forecast for sales of pension annuities, 2019-30
    • Income drawdown market size and forecast
    • Income drawdown sales surge in 2024, although challenges are on the horizon
    • SIPPs sales rise, but share of drawdown market continues to decline
    • Internal drawdown sales remain steady, while non-advised sales rise
    • Graph 6: income drawdown sales, internal vs external, 2020-24
    • Graph 7: income drawdown sales, by sales channel, 2020-24
    • Income drawdown sales distribution channels
    • Demand for flexible income solutions will drive recovery in drawdown sales
    • Graph 8: market forecast for sales of income drawdown, 2019-30
    • Market drivers
    • Cost of living concerns and stock market fears reshape retirement income plans
    • Almost half of newly-accessed DC pension pots are fully withdrawn…
    • Graph 9: number of DC pension pots accessed for the first time, by method of access, 2020/21-24/25
    • …with this method most common among those with smaller pots
    • Gilt yields reach a 15-year high despite base rate cuts…
    • Graph 10: monthly 10-year gilt yields, 2010-25
    • … maintaining the appeal of annuities
    • Ageing population increases the need for long-term planning and advice
    • Graph 11: population, by age group and share of total, 2005-65
    • Regulation and legislation
    • Pensions Schemes Bill promises changes to DB and DC pension policy
    • IHT and salary sacrifice changes will impact retirement income planning
    • FCA’s targeted support initiative empowers providers to nudge savers toward better outcomes
    • Public launch of Pensions Dashboard expected by 2027
  3. THE CONSUMER

    • DC pension ownership and participation
    • Majority of UK adults own a pension
    • Widespread pension ownership highlights retirement market potential
    • DC pension ownership and contributions peak at established career age
    • Graph 12: proportion of adults who own a DC pension and proportion who are making contributions to their DC pension pot(s), by age, 2025
    • Increasingly staggered approach to retirement increases need for pot management tools
    • Graph 13: number of pension pots held, 2025
    • Access to pensions
    • Annuity or income drawdown use
    • Nearly half of over-55s have accessed their DC pension savings
    • Graph 14: proportion of over-55s who have accessed their DC pension pot(s) – net, by method, 2025
    • Annuities remain most popular with over-65s
    • Graph 15: proportion of over-55s who have accessed their DC pension pot(s) – net, by method and age, 2025
    • Early full cash withdrawals from pots require proactive action
    • Evolving retirement plans and preferences
    • DC pension owners seek flexibility, but guaranteed income is of high priority
    • Ongoing cost of living concerns drive demand for stability
    • Promote blended, flexible solutions to those with multiple pension pots
    • Graph 16: retirement income product choice factors, by number of pension pots held – net, 2025
    • Contrasting gender preferences require separate approaches
    • Retirement income concerns
    • Inflation and lack of savings lead retirement income concerns
    • Most DC pension savers have multiple concerns about savings and planning
    • Nudge younger DC pension savers towards advice to ease rising concerns
    • Promote comparison tools and data sharing to help savers find the most suitable pension product
    • Knowledge and understanding gaps
    • Clearer pension funds information will improve savings decision-making
    • Improving product understanding among pre-retirees will enhance retirement income levels
    • Pension product understanding is highest among city-residing parents with young children
    • Strong pension product engagement will ensure financial security for loved ones
  4. INNOVATION AND MARKETING

    • LV= enhances its fixed-term annuity with new benefits and flexibility
    • Aviva launches ‘flex first, fix later’ solution…
    • … and a guaranteed fixed term annuity with an all-online application process
    • Nest bolsters its market position with key developments…
    • … and teams up with Aardman for an ad campaign
    • Standard Life aims to increase access to pension advice via affordable service
  5. APPENDIX

    • Report scope
    • Product definitions: annuity and fixed term retirement plan
    • Product definitions: pension drawdown and UFPLS
    • The market
    • New pension annuity sales
    • New pension annuity sales, by policy type
    • New pension annuity sales, by sales channel
    • Annuity business by providers in the open market
    • New drawdown sales
    • New drawdown sales, by sales channel
    • Annuity and drawdown sales, by internal and external sales
    • Number of DC pension pots accessed for the first time, by method of access
    • Number of DC pension pots accessed for the first time, by pot size and method
    • Forecast methodology
    • Forecast methodology – fan chart
    • Market size and forecast of annuities – volume
    • Market size and forecast of income drawdown – volume
    • The consumer
    • Consumer research questions
    • Consumer research methodology
    • CHAID analysis – methodology data
    • CHAID analysis – methodology data table
    • Generation groups
    • Abbreviations

UK Annuities and Income Drawdown Market – Trends and Insights

  • Sales of annuities grew by a quarter in 2024, reaching a post-pensions freedom high. New annuity sales are expected to continue to grow, with 60% of DC pension owners seeking a guaranteed income pension product.
  • Income drawdown remains the most common retirement income product. Slower interest rate cuts and Autumn Budget uncertainty lowered the appeal of drawdown in 2025, but consumer demand for flexibility in pension products will maintain demand for drawdown.
  • Ongoing cost of living concerns have driven demand for stability in retirement income products, but people are also concerned about not having enough pension savings to have a comfortable retirement.
  • Pension providers need to promote and expand the ways in which a guaranteed income can be utilised within a broader decumulation strategy, by using several retirement income options to create more tailored retirement journeys that meet specific needs both pre- and post-retirement.

Key Issues Covered in the Report

  • The impact of sticky inflation and the downward trend in interest rates on retirement income products, including pension annuities and income drawdown
  • Analysis of annuities and income drawdown markets, including forecasts for the next five years
  • The key features consumers want from a retirement income product, the demand for pension pots consolidation, and whether people have already accessed DC pension pots
  • Consumer concerns regarding their pension savings and retirement planning, including the impact of inflation on savings levels and choosing the wrong product for their circumstances
  • Consumer behaviours relating to retirement planning, including the prospect of having to work later in life to increase retirement income and interest in robo-advice services
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