Apologies to Mark Twain for the use of his often misquoted quotation, which originally appeared in the New York Journal of 2nd June 1897 following newspaper accounts of him being ill or dead.
Following the Budget earlier this month and proposals to allow those reaching age 55 from next April to access their entire pension funds as cash, plenty of newspapers were quick to report the death of the annuity market.
The FT reported analysts speculating on the demise of the individual annuity market, forecasting it would shrink by 90%.
At the time, we were quick to comment that removing the compulsion to buy an annuity at retirement (a compulsion that was actually removes years ago) does not necessarily spell the death of the annuity as a retirement income option.
In fact, buying an annuity will still be the right thing to do for the majority of people at retirement.
This despite their current very low rates and despite the inherent inflexibility that comes with exchanging your pension fund for a financial instrument which pays a set level of guaranteed income for life.
Also exaggerated in the days following the Budget was the risk that some pensioners would withdraw every penny from their hard earned pension funds and blow the lot on some frivolity.
This speculation was not helped by (another misquoted) comment from pensions minister Steve Webb, suggesting pensioners should be free to buy a Lamborghini with their life savings if they want to.
Some new research from MGM Advantage reveals the more likely approach people will take when they have full access to their pension pots for the first time next April.
The research shows that only 3% of the over 55s find spending their pension savings as soon as they can get access to them the most attractive option.
This is unsurprising given the time, cost and hard work associated with building up a pension fund which was designed to provide a secure income in retirement. Was it really ever likely that thousands of pensioners will squander hundreds of thousands on super cars?
The research also found that 42% of over 55s like the certainty of using an annuity to provide some form of regular income.
This seems to confirm our original suspicions that the death of the annuity market were an exaggeration.
According to the MGM Advantage research, 43% of the over 55s like the freedom of managing their own money without an annuity but attempting to make sure it lasts throughout their lifetime.
This is another sensible route once the Minimum Income Requirement for flexible income drawdown is reduced to nil from next April.
We believe that more people reaching retirement age will work with a Financial Planner to determine what a sustainable withdrawal rate from their pension fund looks like in later life.
Lifetime cash flow modelling will become essential to manage the ‘risk of ruin’ talked about in the US, where more flexible access to pension funds is already the norm.
Do get in touch if you would like to chat about the right retirement income option for you.
