"If you have a defined contribution pension, they're the only option retirees have if they want a guaranteed, lifelong income from their pension pot. For many people, this is still incredibly important — no one wants to think about running out of money in their old age.”
He adds: “Clients can combine annuities with drawdown and tax-efficient drawing from other, non-pension assets. This can help make use of all their available reliefs and allowances. Of course, all this depends on their personal circumstances.”
Down but not out
It would seem, therefore that reports of the death of the annuity have been greatly exaggerated, as Alistair McQueen, head of savings and investment at Aviva observes: “With the introduction of the pension freedoms in 2015 came predictions of “the death of the annuity”. This has not happened.
“The guarantee associated with the annuity continues to carry great attraction to many retirees. Increasingly, it is being used to provide a foundation income through retirement, together with the state pension.
"The more flexible drawdown is being used to support changing income needs, on top of this foundation. Others are seeking to use the annuity later in retirement, when income needs are more set. The ability to flex the use of the annuity is a benefit of the pension freedoms.”
Fiona Nicolson is a freelance journalist
