Demand for income products drives Canada Life's annuity sales to new heights
Canada Life UK has achieved a new milestone with its annuity sales, responding to an increased interest in income-focused products.
According to its half-year results, the insurer experienced a surge in new business sales for individual annuities. In 2023, these sales reached £441 million, marking a significant leap from the £220 million recorded during the same period in 2022.
May 2023 emerged as a historic month for individual annuity sales. During this period, the insurer gained over £100 million in new business within a single month. These figures stand as the highest sales performance since the transformative pension freedoms introduced in 2015, as highlighted by Canada Life.
The surge in sales was attributed to an upswing in annuity rates over the past year. This development is especially striking given the backdrop of economic turmoil and escalating inflation. The insurer remarked that the underlying factor driving this demand was customers seeking reliable income products, with Canada Life citing a surge in interest from consumers.
As a reference point, the insurer indicated that a standard annuity for a 65-year-old individual with no prior health or lifestyle conditions would yield around 7% in returns.
“We’ve experienced an extraordinary come-back for individual annuities, driven by the significant increase in value offered from the returns available, combined with customers seeking income security in times of economic uncertainty,” said Lindsey Rix-Broom, Canada Life UK chief executive.
“The record-breaking performance of annuities has been a major driver of new business sales and the outlook for the second half of the year looks similarly very positive,” she said.
Furthermore, these annuity rates displayed a significant potential for enhancement when customers disclosed common health or lifestyle conditions, such as diabetes, high blood pressure, or smoking habits. Additionally, the individual's age played a pivotal role in influencing the offered annuity rate.
“The annuity market has been revitalised by the much better incomes now available, but there has been a quiet revolution going on since the pension freedoms were introduced,” said Tom Evans, Canada Life UK managing director retirement.
“From the introduction of longer guarantee periods, 100% value protection, and more flexible retirement products, customers have an attractive alternative to drawdown to deliver the best value from their pensions,” he said. “Seeking advice, shopping around, and not viewing the decision between annuity and drawdown as a binary choice can deliver a better retirement outcome.”
“The unprecedented demand for annuities over the first half of the year has resulted in our teams often being stretched to deliver the service experience advisers and customers expect,” said Evans.
“We remain focussed on supporting our customers and communities during challenging economic times. The diversity of our business across wealth, retirement, group protection and asset management means we are well placed to meet the evolving needs of our customers and their advisers,” Rix-Broom said.
