When it comes to pension saving there are two primary options: drawdown or annuities. Drawdown was first introduced in 1995, and before this, people had no choice but to buy an annuity, according to M&G Investments.
However, annuities are once again becoming a popular option for those planning for retirement.
Recent research from Legal and General found 990,00 people aged over 55 and still in work are now considering annuities for the first time.
This is in addition to the 829,000 working over 55s who had always planned to buy an annuity in retirement.
The motivations behind the purchase of annuities are varied, however, key draws include improved rates in recent months, as well as the stability a guaranteed income offers.
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“Thinking purely in terms of one product over another and taking an either/or approach is not helpful and there is extensive research that shows a mix of products could give you a better outcome.”
Improved annuity rates are understandably attractive, especially in a time of inflation and a cost of living crisis.
However, Ms Shah stressed it is vital for Britons to consider their individual needs before making any decisions.
Phil Brown, director of policy at People’s Partnership, also told Express.co.uk about some of the advantages and disadvantages individuals may wish to consider.
Indeed, the purchase of an annuity also means Britons have to sacrifice the potential investment growth they could have otherwise received if they remained invested.
It is, for this reason, Mr Brown concurred with Ms Shah, also suggesting a blended approach.
He added: “Using drawdown early in retirement and taking out an annuity later when savers can get a better income from their remaining pot potentially offers people a good balance between the two choices.
“We think that, as people get further into their retirement, they are more likely to need the certainty an annuity can offer – ensuring they don’t outlive their savings.”
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