There’s one financial product to turn to in times of war
With retirement pots so exposed to market shocks, annuities offer welcome certainty
Sam Brodbeck Money Editor
Sam Brodbeck is Money Editor at The Telegraph. See more
Published 11 March 2026 6:00am GMT
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After a lifetime of work it is galling to think that, despite decades of careful saving, the quality of your retirement can come down to chance.
Let’s say for argument’s sake that AI destroys the business model of your favourite stock just months before you plan to take your tax-free cash from your pension.
Or, as in the past week, war erupts, disrupting the supply of oil – the lifeblood of the global economy – and panicking bubbly stock markets, which growing numbers of investors fear are about to go pop.
As I write, the FTSE 100 is still defying gravity and remains at record highs after briefly dropping about 5pc when the oil price shot well beyond $100 a barrel.
There are two trends that have made people who are at or approaching retirement particularly exposed to stock markets.
Firstly, the rapid decline of defined benefit-style pension funds – in the private sector, at least – means how much money you have at the point of retirement is largely down to the stock market.
Defined contribution pensions, where the only certainty is how much you and your employer put into your pot, are usually invested in a strategy designed to move money systematically from shares to bonds as you age.
Everything comes down to investment returns, so what happens to the global economy really matters in a way that people with gold-plated pensions, which are legally required to rise every year (no matter war or flood or famine), will never understand.
The second trend is the mass abandonment of annuities (insurance contracts paying a guaranteed sum for life) as the dominant form of providing a retirement income for people with defined contribution pensions.
Before we go on, a disclaimer: I was not paid by an insurance company to write this article. But I do think annuities are an overlooked but powerful tool in a retiree’s arsenal.
Most people these days go into “income drawdown”, where their pot remains invested and they take regular or ad hoc payments to fund their lifestyle.
The demonisation of annuities – quite rightly, as millions were mis-sold and rates were terrible following the financial crisis – coupled with an inheritance tax loophole (now closed) means today’s retirees are more exposed than ever before.
But, quietly, the equation between the relative benefits of annuities against investing in retirement has shifted again.
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Pension companies can no longer push savers into buying their own poor-value annuities. The tax advantages of leaving money in pension pots will disappear in 12 months, when unspent pensions will form part of your estate for inheritance tax calculations.
Of course, there are lots of advantages to keeping your money invested rather than handing it over to an insurance company and taking a punt on how long you’ll live, what will happen to inflation in the next 30 years and so on.
The most obvious advantage of drawdown is the ability to grow your portfolio while taking an income as and when you please.
In bad years? You can cut your payments and protect your capital. And in a great year? Book yourself a cruise.
But not everyone has the ability – or inclination – to keep abreast of the performance of their portfolio or even make investment decisions. In your 90s, do you really want to be thinking about what the departure of a star manager means for the strategic asset allocation of a fund you hold? I certainly don’t.
The last and perhaps best reason you should reconsider an annuity is the payout.
Rates are at an 18-year high, with a 65-year-old able to get 7.6pc: £7,600 a year for life in exchange for £100,000.
A 75-year-old can get 10pc, so you only have to live another decade to get your money back.
Of course, this is not an either/or decision. You can stay invested and buy some guaranteed income. The question you have to answer is: what price do you put on peace of mind?
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