The FCA has released new data showing the actions that individuals have taken the first time they access a pension pot. It collected the data from all regulated firms that provide retirement income products during 1 April 2018 to 31 March 2019.
Key findings include;
- In total, 646,530 pensions were accessed for the first time to either buy an annuity, move into drawdown or take a cash withdrawal
- 55% (354,844) of pensions were fully withdrawn
- 30% (190,971) of pensions not fully withdrawn entered into income drawdown
- 11% (73,977) of pensions were accessed to purchase an annuity which have continued to decline steadily as a proportion of all pension withdrawals
- 4% (26,738) of pensions were accessed to take partial lump sum payments from uncrystallised funds (UFPLS)
- Almost half (48%) of pensions were accessed without regulated financial advice or guidance being taken
- For pensions that entered income drawdown, 34% of plan holders did not take regulated financial advice although 9% received Pensions Wise guidance
- Less than half (46%) of pensions going into income drawdown were sold to new customers, rather than to existing customers with the firm.
Jonathan Watts-Lay, Director, WEALTH at work, comments;
“These findings highlight the continuing popularity of freedom and choice in pensions amongst individuals.”
He adds; “As the findings show, many individuals are now moving away from purchasing an annuity towards income drawdown. Whilst this option brings much more flexibility, the downside is that without the expertise of how to manage this appropriately, it can be easy for employees and pension scheme members to make poor decisions which can create a permanent dent in their retirement income. For example this could include paying more tax than necessary, underestimating how.