Employers expect 40% of employees to buy an annuity

Employers predict that two-in-five (40%) of their employees will buy an annuity at retirement once the government’s pension reforms giving more flexibility at retirement come into effect next April, according to research by Towers Watson.


Its research, which surveyed 92 UK employers, found that a third (33%) of respondents thought that less than a quarter of their employees would buy an annuity.

Meanwhile, 29% of respondents thought between a quarter and half of their workforce would also do so.

And a third predicted between half and three-quarters of their employees would purchase an annuity.

The research also found that the best available annuity offered to a 65-year-old looking for a single income from a defined contribution (DC) pension pot worth £25,000 has declined by 3.3% since the Budget in March.

This represents a fall from £1,508 per year in March to £1,458 in August.

Will Aitken (pictured), senior consultant at Towers Watson, said: “Clearly, a lot of organisations are preparing for employees to explore alternative income options once they reach retirement, but the picture is still very mixed from company to company.

“That uncertainty is to be expected. Someone on course to have a fund of £10,000 may have a very different intention to someone on track for £100,000.

“Employers need to work out what their employees are anticipating at retirement as a first step towards predicting how, when and with what they will retire.”