Aviva has launched a guaranteed fixed-term annuity, offering retirees an income for between three and 25 years without requiring a lifetime commitment.
The product is designed to provide predictable income while allowing flexibility at the end of the term.
The launch comes as annuity demand strengthens with data from Hargreaves Lansdown showing that the average annuity purchase size has increased by more than 160 per cent since 2021, making 2024 the strongest year for sales since pension freedoms were introduced.
The new product follows Aviva’s earlier ‘Flex First, Fix Later’ guided retirement solution for workplace customers, with plans to extend the proposition to group personal pension (GPP) clients in the future.
Quantum Advisory has highlighted that while annuity demand is growing, products remain too rigid. The consultancy calls for further innovation to create solutions that offer guaranteed income while adapting to retirees’ changing needs over time.
A Corporate Adviser report also notes limited product development for the Muslim community. There is currently no clear Shariah-compliant annuity and while sukuk-backed pension funds are emerging, retirement income options remain limited.
Quantum Advisory partner and actuary Stuart Price says: “More people are turning to annuities in their retirement planning, and this trend shows no signs of slowing down. With high annuity rates due to the high interest rate and high gilt yield environment we are currently in, momentum continues to build and 2025 could surpass 2024 as the best year for annuities.
“However, it is difficult to reverse annuity decisions, particularly if a lifetime annuity is selected, so savers must research all the options available to them.
“It is good to see that the market is looking to develop retirement products to meet the everchanging needs of people in their later life. New annuity products are a step in the right direction, but there is scope to develop options that truly reflect savers’ lifestyles and offer greater control at different life stages.
“While drawdown provides flexibility and the opportunity to take a regular income, there are no guarantees due to the impact of markets and investment performance. The newly launched Aviva annuity product provides a guaranteed income but is not fixed for life so does provides a level of control and flexibility for savers.
“In the future, I would hope to eventually see some form of annuity product based on the ‘V shape’. This would reflect the needs of pensioners throughout their retirement: providing more income when an individual is just retired to meet their active needs and lifestyle, reducing when an individual becomes less active with less of a requirement for an income and then increasing again with age when income could meet care costs.”