Flexi-drawdown is pensions freedom winner

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Flexi-drawdown is pensions freedom winner

Since the April at-retirement reforms, £1.38bn has been invested into flexible drawdown pension products via single premiums and transfers, with inflows up 15 per cent in the third quarter, a value increase of £99m compared to the second quarter.

Data from Equifax Touchstone covers 90 per cent of the UK’s largest life and pensions companies, showing that new investments (excluding transfers) across pension products, stands at £8.69bn for January to September 2015, compared with £5.56bn for the same period last year; an increase of 56 per cent.

Total self-invested personal pension inflows for the first nine months of this year stood at £12.29bn, compared to £9.41bn for the corresponding period in 2014, which is growth of 31 per cent.

The bulk of Sipp inflows this year have been via transfers, representing 54 per cent of investment, followed by single premiums at 43 per cent and 3 per cent via regular premiums.

Geoff Greensmith, director at Equifax Touchstone, argued providers cannot afford to be complacent “if their proposition is not up to scratch they will see clients walk”.

He also noted managing the transfer of pension assets is a service that not all financial advisers offer, as it can sometimes be time consuming and costly for the end investor.

Mr Greensmith said: “However, Touchstone stats show that levels of pension transfers remain high and there is clear demand for consumers to find the right solution to meet their individual retirement needs.”

Figures from eValue in October suggested 43 per cent of people are now exploring a guaranteed income post-retirement, compared with 33 per cent in April.

Meanwhile the 54 per cent of people who preferred flexible income has reduced to 44 per cent, meaning the 21 per cent gap in preference has reduced to just 1 per cent in the space of six months.

The preference for cash has remained exactly the same since the reforms were introduced, with 13 per cent favouring this option.

Data from Fidelity International confirmed that drawdown was the biggest theme last month, with 21 per cent of enquiries to its call centre, up from 15 per cent in September, while those seeking to get hold of tax free cash fell from 24 per cent in September to 18 per cent in October.

Other providers have also seen this year’s profits driven by post-pension freedoms demand for drawdown, with LV reporting pension sales up by 40 per cent over the first nine months of this year, while Royal London saw individual pensions up 52 per cent during the third quarter.

peter.walker@ft.com