Less than one in 10 (7 per cent) savers plan to use all their pension savings to buy an annuity, according to analysis by CoreData Research.

Its research found that low rates were considered the largest disadvantage associated with annuities, with over a third (35 per cent) of savers citing this as a key barrier.

Broader fees and costs were also highlighted by 19 per cent of savers, whilst inflexibility and taxation issues were both cited by 12 per cent of respondents.

However, almost half (43 per cent) of respondents would consider an annuity when taken alongside other options, such as taking a lump sum and keeping some investing.

This mixed approach was particularly popular amongst women, with 50 per cent stating that they would be keen to take this option, compared to just 39 per cent for men.

Instead, men generally preferred the idea of taking a tax-free lump sum of 25 per cent and moving the rest into income drawdown, with 35 per cent favouring this approach compared to just 23 per cent of women.

Taking multiple lump sums proved to be only slightly more popular amongst savers than annuity-only plans, with less than one in five (16 per cent) taking this approach.

Just 3 per cent of respondents stated they would take their entire pot as cash, representing the least favourable option.

CoreData Research head of international, Craig Phillips, added: “While record low rates have dented appetite for the annuity-only option, our findings suggest that annuities still have a role to play in retirement plans.

“Furthermore, the market turmoil unleashed by Covid-19 means that fixed term annuities could hold particular appeal for those seeking a degree of certainty over a specific period."

The research has also revealed some discrepancies, between those taking financial advice and those taking a DIY approach, in how savers plan to use their pension pot.

For instance, those who took financial advise were actually more likely to use their lump sum for holidays or travel (48 per cent) than their non-advised counterparts (43 per cent).

Non-advised investors meanwhile, were more likely to use the lump sum to pay of their mortgage, with 41 per cent taking this option, compared to just 28 per cent of advised investors.

Furthermore, women were almost twice as likely than men to use a lump sum for emergency cash, with 27 per cent taking this approach compared to 15 per cent of men.

Phillips: “These findings may reflect different levels of wealth between advised and non-advised respondents.

“Advised investors may be better off financially and therefore more likely to think they can afford holidays.”

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