Younger people intend to include annuities in their retirement strategies, despite sweeping changes to pension rules, a new survey has found.

The survey by Legg Mason Global Asset Management found UK millennials could buck the trend set by older investors.

Since last year's pension freedoms were introduced, annuity sales dropped as people aged 55 or over were exempted from having to purchase one at retirement.

Sales have fallen from around GBP 2.5bn a quarter prior to the change, to around GBP 990million since the freedoms have been implemented.

However, while older savers said they plan to eschew annuities, with 72 per cent of investors aged 40 or over saying they do not intend to buy one, millennials are far keener.

In total, 84 per cent of UK millennials said they are 'highly likely' to consider using an annuity, despite being under no obligation to do so.

Millennials with large pools of assets (those with at least GBP 699,000 of investable assets) were even more enthusiastic, with 92 per cent of respondents in this category saying they are 'highly likely' to buy one.

Adam Gent, head of UK sales at Legg Mason said: "Last year's effective removal of the need to buy an annuity has had a huge impact on sales and our research suggests the market is unlikely to stage a significant recovery anytime soon.

"However, it is fascinating to find that younger investors, particularly those with larger pools of investable assets, are far more interested in using an annuity as part of their overall retirement strategies.

"It implies that, while providers are likely to continue to struggle with the fallout of the pension freedoms in the short term, annuities could still have a big part to play in the UK retirement market in the coming years."

First published 21.04.2016

Lindsay.sharman@wilmingtonplc.com