Full Breakdown
Surge in Annuity Sales Driven by Inheritance Tax Changes
2/14/2026, 12:36:50 PM
Record Sales in the UK and US Markets
Annuity sales have reached unprecedented levels in both the UK and US markets, driven by changing consumer attitudes and regulatory shifts. In the UK, sales of retirement annuities grew by 4% in 2025, totaling £7.4 billion, with the average investment surpassing £80,000 for the first time. This increase is attributed to a heightened interest in securing pensions against the backdrop of an impending inheritance tax (IHT) change announced by Rachel Reeves in her October 2024 budget. The new regulations will subject unused pension savings to IHT starting April 2027, prompting individuals to consider annuities as a means to safeguard their assets.
In the US, total annuity sales also hit a record high of $461.3 billion in 2025, marking a 6% increase from the previous year. The growth is largely fueled by products that offer a blend of growth potential and downside protection, particularly registered index-linked annuities (RILAs) and fixed indexed annuities (FIAs). RILA sales alone surged by 20% to $79.6 billion, reflecting a significant shift in consumer preferences toward more secure investment options.
Impact of Inheritance Tax Changes
The UK government's decision to include unused pension funds in the IHT net has significantly influenced consumer behavior. Clare Moffat from Royal London noted that this change has led to increased interest in annuities for IHT planning. The shift comes after a period of declining annuity sales following the introduction of pension freedoms in 2015, which allowed individuals greater flexibility in managing their retirement savings.
In the US, the demand for annuities is similarly linked to a demographic shift, with over 4 million Americans reaching retirement age each year. Many of these individuals lack traditional pensions, leading to a growing reliance on annuities as a source of guaranteed income. The Alliance for Lifetime Income found that 51% of Americans aged 61 to 65 have less than $100,000 in assets, raising concerns about their financial security in retirement.
Criticism and Opposition
Despite the surge in sales, annuities have faced criticism for their complexity and perceived lack of value. Some financial experts argue that while annuities provide guaranteed income, they may not always be the best option for all investors, particularly those who could achieve better returns through other investment vehicles. Critics also highlight the fees associated with annuities, which can erode long-term gains.
Official Statements & Responses
Rachel Reeves emphasized the need for the IHT changes, stating that they aim to ensure that individuals are more mindful of their estate planning. Meanwhile, Bryan Hodgens from LIMRA pointed out that the growth in annuity sales reflects a broader trend of investors seeking security amid economic uncertainty.
Verbatim Quotes
- “With changes next year to inheritance tax and pensions, there has been an increased interest in using annuities for IHT planning.” — Clare Moffat, Royal London
- “Indexed products – registered index-linked and fixed indexed annuities – represented 45% of total sales in 2025, up from just 24% market share a decade ago,” — Bryan Hodgens, LIMRA
The rising sales of annuities in both the UK and US highlight a significant shift in retirement planning strategies, driven by regulatory changes and evolving consumer needs.
