Thousands of Britons will have to wait longer to access their retirement payments due to the state pension age increasing next year, but analysts are reminding the public that they can recover any loss of income from a retirement savings "trend".
New data reveals that people are purchasing annuities well before reaching state pension age, with buyers averaging 64 years old for lifetime annuities and 63 for fixed-term products.
The figures from Standard Life, part of Phoenix Group, highlight a significant gap between when people secure guaranteed retirement income and when they become eligible for the state pension at 66.
Analysts note this trend demonstrates how over-50s are increasingly recognising annuities as a solution for creating reliable income streams during the early years of retirement, before state pension payments commence.
Annuities are considered a viable option for pensioners looking to boost their retirement income
GETTYThe challenge facing retirees is becoming increasingly acute, with Standard Life research showing that 48 per cent of retirees have stopped working by age 60.
This creates a six-year period without state pension support, a gap that will expand further when the state pension age increases to 67 next year.
Notably, the timing mismatch between typical retirement ages and state pension eligibility means many face years without guaranteed government support.
With nine in ten over-50s saying they value income security and certainty in retirement, the need for alternative income sources during this transition period has become paramount.
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Britons are concerned about the rise in the state pension age
GETTYNearly half of over-50s planning to purchase a fixed-term annuity say they will do so at retirement specifically to bridge this income gap, according to the research.
Pete Cowell, Head of Annuities at Standard Life, said: "As The Beatles sang in When I'm 64, the question of whether you'll still be needed and fed in your later years is significant one, and reminds us of the importance of planning for the future."
He noted that the decision to purchase annuities well ahead of state pension age reflects growing recognition of their value in covering costs during early retirement.
"While the decision around if, how and when you choose to retire is unique to each person, the fact that over-50's are choosing to purchase annuities well ahead of the state pension age is telling," Cowell continued.
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Using an annuity search engine is crucial for retirees to understand what the market can offer before making their final decisionGETTYHe highlighted that annuity sales increased by 34 per cent last year, according to the Association of British Insurers, and expects this trend to continue as the state pension age rises.
Cowell emphasised the variety of options available: "What’s important to remember when considering annuities is that there are different types of annuity products and options available, and different ways they can be used as part of a wider mix of retirement income solutions.
"Lifetime annuities can provide a guaranteed income for life, while a fixed-term annuity ensures a guaranteed income for a set period, which can be particularly helpful for people navigating a phased or full retirement before state pension age.
"For those considering the financial well-being of their loved ones, a joint life annuity can also provide an income that ensures, event after one partner passes away, the surviving spouse continues to receive financial support."