Just 29% of annuity buyers took professional advice before choosing an annuity despite the ability to shop around for a better deal.

The sales figures reveal a remarkable turnaround for annuity sales which have been declining for many years against a backdrop of falling gilt yields and low inflation.

The ABI said that strong annuity sales reflected rising interest rates as more people looked to secure a reliable retirement income for life.

Annuity sales in 2023 were up 46% on 2022 and the highest level since 2014 when the Pension Freedoms were announced.

ABI figures showed a bumper fourth quarter of £1.5bn in sales with a strong third quarter of £1.4bn in sales.

The number of annuity contracts sold jumped in 2023, to 72,200, up 34% on 2022. It was the higher number recorded since 75,000 were sold in 2016.

Level-only annuities, which pay the same income every year, remained the most popular version of the product, at 82% of the total number sold.

The proportion of escalating annuities sold increased by 2 percentage points compared to 2022, making up the remaining 18% of total sales.

The ABI said that with six providers offering annuities to new customers, 2023 also saw 64% of annuity buyers shop around.

However, only 29% of customers who bought an annuity did so with the help of professional advice.

The ABI said that recent research carried out on behalf of the ABI by Thinks Insight and Strategy’s Behavioural Team suggests that there could be a compromise when it comes to advice. The research suggests that when professional guidance is ‘personalised’ to an individual’s circumstances, it can significantly impact the individuals decision making, leading to a better financial outcome.

The insurance and investment provider trade body also pointed out that the Government and FCA’s continued work to close the advice gap as part of their Advice Guidance Boundary Review provides the “opportunity” to take a step towards closing the advice gap.

Rob Yuille, ABI head of long-term savings policy, said: “Securing a guaranteed income for life remains an important part of the mix of options for people to consider at and during retirement and it’s great to see more people taking advantage of the protection they have to offer. It is also encouraging to see more people exploring the market to secure a higher income.

“However, we’d like to see more people taking advantage of professional advice and new forms of targeted support for consumers to ensure they can enjoy the best possible retirement.”

The bulk annuity market also continued to thrive with sales reaching £22 billion in the final quarter of 2023, taking the yearly total to £49.3 billion.

Financial Planning Today Analysis: The huge jump in annuity sales in 2023 confirms that annuities are back on the table when it comes to retirement planning. Indeed, many providers have been struggling to keep up with the demand for annuities as buyers look to gain from rapidly rising annuity rates. Many Financial Planners are now factoring in annuities which will likely remain attractive while rates remain high. With interest rates set to remain high for some time the annuity boom is not over yet. The additional value in annuities is making the retirement picture more complex but potentially more rewarding for clients who appear to be combining annuities with drawdown and other options, choosing the relatively safety of annuities and their ability to provide lifetime guaranteed income. Of concern, however, is that despite the large sums often involved fewer than three in 10 annuity buyers are choosing to take professional advice. This needs to be addressed if some buyers are not to make poor choices and potentially lose out as a result.