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
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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
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
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
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
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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