More people opt for escalating annuities
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Retirees buying an annuity are now more likely to include some inflation protection. In 2024-25, sales were up 17% compared with the year before, analysis from Just Group suggests.
The numbers of escalating annuities sold is still low at 17,427 but has risen from 14,898 in 2023-24 and now makes up a fifth of sales, Just’s analysis of the Financial Conduct Authority’s latest Retirement Income Market Data has found.
Enhanced annuities – which take into account medical or lifestyle factors – have also become more common. In 2024-25, 42,339 enhanced annuities were sold, according to Just, an increase of 18% year-on-year. Last year, enhanced guaranteed income for life products made up almost half (48%) of total sales.
The increase in inflation-linked annuities comes as the energy price shock from the war in Ukraine and Covid-related supply chain disruption reminded some people of the risk of eroding value. After the high levels of 2022, the consumer price index fell to 1.7% a year ago but has been on the rise again since, reaching 3.8% last month.
Group communications director at Just, Stephen Lowe, thinks the increase in escalating and enhanced annuities shows customers make better informed decisions, often securing a higher income that way.
Just’s analysis suggests two-thirds of annuity customers could be eligible for enhanced rates.
The numbers of escalating annuities sold is still low at 17,427 but has risen from 14,898 in 2023-24 and now makes up a fifth of sales, Just’s analysis of the Financial Conduct Authority’s latest Retirement Income Market Data has found.
Enhanced annuities – which take into account medical or lifestyle factors – have also become more common. In 2024-25, 42,339 enhanced annuities were sold, according to Just, an increase of 18% year-on-year. Last year, enhanced guaranteed income for life products made up almost half (48%) of total sales.
The increase in inflation-linked annuities comes as the energy price shock from the war in Ukraine and Covid-related supply chain disruption reminded some people of the risk of eroding value. After the high levels of 2022, the consumer price index fell to 1.7% a year ago but has been on the rise again since, reaching 3.8% last month.
Group communications director at Just, Stephen Lowe, thinks the increase in escalating and enhanced annuities shows customers make better informed decisions, often securing a higher income that way.
Just’s analysis suggests two-thirds of annuity customers could be eligible for enhanced rates.
“The shockwaves of the inflation spike following the pandemic may be influencing customers’ decisions when purchasing guaranteed income for life, with a notable uptick in escalating plans being purchased,” he noted, but added that “it’s important customers think carefully about the type of annuity they purchase – once the decision has been made it can’t be undone.”
The vast majority of annuities sold are level annuities, which lose value over time but start at a higher level. Inflation-protected annuities begin from a considerably lower level than fixed rate annuities. It can take as long as 20 years until someone has drawn the same total income over time through an escalating annuity as through a level one, depending on the level of escalation.
