But interest rate cuts coincide with quote volume dip in Q3 and Q4

Adviser interest in annuities has boomed during the past decade with comparison quotes up 64% in 2024 compared to 2014, data from iPipeline has revealed.

The 2024 full-year statistics were the second highest overall since the life insurance and pensions technology provider began recording the data in 2013.

The highest quote volumes to date were in 2023. Overall, 2024 volumes were down 6% compared to the previous year.

iPipeline said the 2024 figures, compared to those of 2023, “showed a steady climb of activity in Q1 and Q2 (up 18% and 6%, respectively), yet this was followed by a decrease in Q3 and Q4 (both down 22%)”.

It pointed out that this trend coincided with two interest rate cuts in the UK, which occurred in August and November 2024.

iPipeline product strategy director Paul Yates said: “After interest rates hit rock bottom in March 2020 at 0.1%, they only began to climb again in December 2021.

“During 2022 and 2023, we saw a big uptick in annuities interest as a result (21% and 60% year-on-year increases, respectively), but that appears to have stabilised in 2024.

“Assuming there are no major global events in 2025, we expect to see small interest rate reductions throughout the year, which should mean we see a stable level of annuities activity.”

He added: “Annuities play an important role, however, in retirement planning, beyond the correlations with interest rates. They are an important way of tying in a guaranteed income for older retirees who are already into drawdown and therefore, we believe that demand for annuities should remain consistent, if full advice is being given.”

Plan Money director Peter Chadborn commented: “One of the financial planning positives in the last couple of years, as a result of the Bank of England raising interest rates to combat high inflation, was the associated increase in annuity rates.

“This brought the unloved annuity back on the table as a viable solution for retirement income provision. With the decline in defined benefit pension availability and persistently low rates previously, there were limited options for those needing to provide an element of income security, which is a core tenet of post-retirement planning.

“Initially, annuity providers were seemingly unprepared for this forecastable increase in demand, with processing frequently too protracted. Thankfully, the market has now settled.”

Gilt yield drama has driven interest in annuities

January’s gilt yield drama resulted in renewed interest in annuity products.

AJ Bell director of public policy Tom Selby said at the time that while annuities “languished in the doldrums throughout the 2010s” rising yields would filter through to improved rates.

Canada Life retirement income director Nick Flynn added at the time: “Additional government spending, global uncertainty and higher taxes are all contributing to the recent increase in the cost of government borrowing.

“Whilst there are no cast-iron guarantees, if this trend continues, then it’s a strong possibility that annuity rates will be maintained or even increase in 2025.”

Earlier this month, data from the Association of British Insurers (ABI) showed total annuity sales reached £7bn in 2004, an increase of 34% year-on-year.

Some 89,600 annuity contracts were written in 2024 surpassing last year’s total and reaching a new ten-year high, the ABI said.

Hargreaves Lansdown head of retirement analysis Helen Morrissey commented on 12 February the “bond market dramas at the start of the year” may have been unsettling for investors, but they were a “boom time for annuities”.

“The fact that rates have remained high at the start of 2025 bodes well for annuities and means we could see a good chunk of the robust growth of 2024 stretch into 2025 too,” she added.