Early call data from Fidelity has confirmed predictions that many of those with smaller pensions would use the new freedoms to take their whole pots regardless of the tax implications, while those with larger amounts more likely to withdraw just the tax-free element up front.
Fidelity Retirement Services took over 1,300 calls from customers last week, mainly from customers looking to withdraw cash from their pots, according to head of retirement Richard Parkin.
He told FTAdviser that in terms of DC clients, around 75 per cent wanted to take all or a specific amount of money, while the remainder just wanted to withdraw their tax-free amount. He added, though, that projections for call volumes was “a little behind projections”.
Mr Parkin says: “It was mostly the small pots that were taking all the cash, not caring about the tax implications even when they were explained, while larger accounts were just taking the tax-free amount,” he stated.
There are currently fears that consumers who withdraw their whole pot could drain it a lot quicker than if they had an annuity or a drawdown plan.
Data previously revealed from Equitable Life had found 95 per cent of those covered by increased trivial commutation limits since the last Budget had sought to take their cash. There is now no limit on the amount that can be withdrawn in one go, subject to provider facilitation.
Mr Parkin had stated last week during a live FTAdviser debate that there was “already” a rush for pension cash even ahead of the reforms, with this likely to grow among a larger group of smaller-pot savers following the reforms coming into force.
In addition to the calls from retirees, Fidelity also took several calls from people under the 55 age limit for pension freedoms access, most notable of which was from a 23 year-old who thought he could access his pension pot.
Several customers also thought that 6 April was a deadline, rather than the start of the new rules, the firm said in a statement.
Aegon, Royal London, Legal and General, LV, Phoenix and Prudential all told FTAdviser were not open for business on the bank holiday Monday.
A spokesperson for Prudential did mention to FTAdviser that he expected call volumes to increase by 50 per cent for the rest of this month - from roughly 48,000 to over 70,000 - and to remain around 30 per cent higher than normal for the rest of the year.
Aviva was open, but a spokeswoman said that they were pretty quiet, with a mix of initial customer enquiries.
In the direct market, early data from Hargreaves Lansdown revealed that 42.1 per cent of their investors called to enquire about drawdown, way out ahead of ad-hoc lump sum withdrawals (16.9 per cent) and annuities (9.8 per cent).
Just 6.6 per cent of callers wanted to know about taking tax-free cash only and 7.7 per cent were interested in taking all their pension out in one go.
Tom McPhail, head of pensions research at Hargreaves, said that while it will take some time for a clear pattern to emerge, a couple of things are already apparent.
“Initial demand has been focused on an investment income rather than buying an annuity, though we do expect this balance to swing back to some extent in the weeks to come.
“Relatively few people are asking to take all their money out; we’ll be tracking the sums involved however in the main we expect it to be at the smaller end of pension pot sizes.”
peter.walker@ft.com
