Standard Life have prompted Alan Livesy to comment on the rise and rise of annuities as a place to invest for the rich.

This of course is not a strategic change for the country, it is a tactical move from well-informed savers who find themselves with money in their pots,  that will largely go in tax if they were to die.

Tactical advantage  right now is that gilts and private bonds that drive annuity rates have been in favour of annuity purchasers. So long as what is being bought as a level annuity is being purchased at round about state pension age (now 67 if you’re doing it imminently) you should get 8% of your purchase as income, maybe more if you have a problem that may shorten your life. Those problems can include living with a dodgy postcode where you and your neighbours are considered unlikely to live as long as entry. Health conditions and lifestyle (drink and fags) all come into “underwriting.

The sharp consumer will paint themselves as bad living, living in the least desirable of the houses owned and all the bad news from the doctor and your consultants.

What I am painting is a very shrewd customer a long way from the bugs who purchased annuities without shopping around from the pension they had saved with. Annuities are now an investment for the rich.

I have a lot of friends who are rich and shrewd and are buying annuities through their advisers. I suspect that financial advisers are now including annuities in their financial advice. The latest move by Just has been an annuity that sits like a bond in a portfolio , enabling the money purchase continues to be money under advice and can generate ongoing fees to the adviser. This gets round the biggest problem that IFAs have with the annuity, it is literally taking away the IFAs income to provide income for their clients.

There is nothing wrong with this, it is tax efficient, easy money to collect  and it is income to the adviser for as long as the annuity holder survives. I would like to say that the annuity is “real” – that’s counting on it increasing each year at a rate to protect the income against inflation. I would like to think that it protects the spouse/partner if the annuity and dies first. But I don’t think this is happening and that’s because investments are sold as a simple swap of capital for income.

I do not think that the annuity market is really a reflection of the market as a whole. When it comes to hiding the money from IHT, it is estimated that only 50,000 people die a year leaving an IHT bill . This is a tiny proportion of those entering retirement with a need for a pension to last them a lifetime. The media has made such a fuss out of IHT you would have thought they were in the pay of annuity providers!

It is time that we re-thought retirement income as an insurance against living too long.

The investment craze for annuities has seen the average annuity purchase  up 14 per cent year-on-year, increasing from around £91,000 in 2025 to over £100,000 so far in 2026. Part of this is inflation , part is growth in DC pots and some of this is money that is reducing inheritance tax.

Mark Ormston of Retirement Life, edits a report on annuities purchased through his brokerage. He actually saw a fall by 1% in annuities bought to protect both parties in a marriage .

Advisers are beginning to get involved in annuity purchase but only around one fith of purchases are advised.

But not a lot of planning is going into the purchase, certainly not as a replacement for a wage. Four out of five annuities are purchased on a level basis and this will not be challenged so long as the estimated retirement quoted on the dashboard Pension is quoted without spouses income or any increase in the annuity that could be purchased now.

The purchased annuity market is going through a boom and there is nothing wrong with that, but to assume that annuities are the solution for our pension adequacy problem is pushing things too far. Standard Life are rightly pointing to annuities as a late in life product (they talk of the over 75 market) .

Individual annuities are expensive ,  they are not invested and can’t really be likened to the income from the State Pension, DB and CDC pensions that pay out what can be offered  (the State Pension and DB pensions have guarantees against the income going down).

The DWP, taking an average of increases in income from CDC, reckon that a CDC pensioner can get up to 60% more income (like for like) than offered by annuity. The bulk of this increase comes not from lower expenses but from the long-term advantage of being invested rather than insured.

There is a much larger demand for insurers from”retirement guidance” from workplace DC plans. These are using variations on a simple idea known as  flex and fix. This  will provide annuities as a default for those who still have pots and are alive later than at a minimum aged 75  (Nest are talking of 85).

Flex and Fix , is an alternative to CDC and will likely see “up to 60%” narrow to  “up to 30%” –  if flex and fix is used as a well run income drawdown/later life annuity plan.

But I’m putting my money on employers wanting the simplicity of CDC and the increased wage in retirement over the flexibility of drawdown.

Later-life annuities bought by well-off people , will be valued as  much for tax efficiency as a wage for life.

DC pension schemes have so far (Nest / Rothesay) decided to purchase differently  – using a  bulk rather than an individual annuity. This we see as the way forward for flex and fix.