The at-retirement market is set to grow considerably in the next 10 years, according to research by Towers Watson.
Its research, which used projections derived from a study of the aggregate value of UK pension pots for different age segments, estimated that inflows into the market will reach £50 billion by 2023, more than three times its current size.
According to the research, as this growth unfolds, more people will have savings in defined contribution (DC) pension schemes and will need to take active decisions about what to do with them.
It also found that, by allowing people to use their retirement funds in more diverse ways, wider savings market trends will result in projected annuity sales rebounding to more than £10 billion by the end of 2023.
Jeremy Nurse, a director at Towers Watson, said: “This growth in the overall market and the increased flexibility retirees will have in how they use their pension pots should encourage innovation from product providers to ensure they offer [retirees] attractive income and protection options.
“Contrary to the gloomy picture of the future of the annuities market that has been painted since the March Budget, we think annuities will remain an appealing and safe proposition to many [retirees] and an attractive market to providers.
“Over and above the numbers we’ve arrived at, there are several circumstances that could push future annuity sales higher in our opinion, particularly with the government’s decision to allow transfers from final salary schemes and its encouragement of product innovation, such as annuities with declining payments or from which lump sums can be drawn.”