After a year of financial market volatility and economic uncertainty, annuity offerings have seen their attractiveness surge for the first time in years. Increased rates have had a considerable part to play in this, propelling annual annuities payments by 52% and with it, bringing forward the date at which the retiree breaks even on their initial lump sum investment.

Drawdown funds have remained popular for many years, however as the spotlight falls ever increasingly onto annuities, employees reaching retirement age have begun to consider a more blended approach to savings vehicles. Retirees with low-risk appetites and loss tolerances have looked to a combination of the two product options – an annuities purchase to cover fixed expenditure, such as bills, and a drawdown fund to support non-essentials, such as holidays and travel. Stephen Lowe, of Just Group, sees annuities and drawdown funds as complementary solutions – the annuity can protect against investing downsides (as shown this year) and the drawdown can benefit from upsides in the market.

The 2015 pensions reform has vastly increased the variety of retirement product offerings, but it must be noted that, according to the Institute for Fiscal Studies, people in their 50s, 60s and 70s are put off by annuities as they underestimate the likelihood of survival into old age.

Looking to the future, there appears to be no slowing down in the annuities market – increased market volatility, an ageing population and more retirement product offerings than ever. Although, with this, retirees will have to take more care than ever when designing their retirement plan as the number of product combinations grows.