Pension annuity sales are soaring to new heights, with the average pot exceeding £80,000. But here's where it gets controversial: the government's 'inheritance tax raid' on pensions is driving this trend. Industry data reveals a record-breaking 2025, with sales growing by 4% to £7.4bn and the average amount invested in an annuity surpassing £80,000 for the first time. This surge in popularity can be attributed to people's desire to minimize their tax liability and seek financial security in uncertain times. An annuity converts an individual's pension pot into a regular, guaranteed income for life. However, demand plummeted after the 'pension freedoms' introduced in 2015, which removed the obligation to purchase an annuity. But changes to inheritance tax (IHT) on pensions announced by Rachel Reeves in her October 2024 budget have given annuities a new lease of life. These changes mean 'unused' pension savings could be taxed as part of someone's estate if they exceed the IHT threshold. And this is the part most people miss: annuities now offer better value than they used to. With an increased interest in using annuities for IHT planning, it's clear that people are recognizing the potential benefits of this financial product. So, are you considering annuities for your retirement planning? What are your thoughts on the government's impact on pension annuity sales? Share your agreement or disagreement in the comments below!
