Personal Pension  

Surge in income drawdown enquiries as pot sizes slide

Surge in income drawdown enquiries as pot sizes slide

Data from Selectapension reveals a 42 per cent surge in the number of drawdown cases being analysed by advisers since the March 2014 Budget, as the average pot size for the option has fallen by 40 per cent.

The firm said the data highlights that income drawdown is an increasingly popular choice amongst clients approaching retirement and that this trend also suggests that the upcoming pension freedom rules have made advisers consider drawdown for a wider range of clients.

An analysis of income drawdown cases found the average pot size reviewed by advisers was only £155,905 compared with £262,688 for the period April 2014 to January 2015 from the same period one year earlier.

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Over the last year, there has been a 46 per cent increase in the number of income drawdown cases for male clients but for female clients the rise is much smaller at just 24 per cent.

Following on the pension reforms announced in the Budget, all providers have revealed at least 50 per cent drops in individual annuity sales.

Today (4 March), Legal and General announced in its annual results that individual annuity sales were down 54 per cent to £591m last year, and it expects this market to “remain subdued” in 2015.

Selectapension said that, according to Association of British Insurers findings from November 2014, levels of drawdown sales are high and more consumers may now be considering this as their preferred at-retirement option.

Andy McCabe, managing director at Selectapension, said: “We expect income drawdown usage to continue to surge after the pension reforms come into force as a wider group of clients consider different options for their retirement income.

“It is likely this will create a greater number of clients seeking out pension advice, and hopefully women will also be actively seeking professional advice about their retirement options.

“This is a time of unprecedented change in our industry. To make the most of this opportunity, Advisers will need to have the best tools possible to provide clients with up-to-date advice.

“Our well established income drawdown calculators are being re-engineered in preparation for the changes in legislation and we are well-placed to support advisers during this period.”