Matthew Harris, owner and IFA at Dalbeath Financial Planning, suggested that the chance that the existing provider is the best option for either drawdown or annuities is about 5 per cent, so only one in 20 customers should stay with their existing provider on average.
“The fact that 60 per cent are doing so means that people are missing out on thousands of pounds of income in retirement.”
Customers using drawdown or UFPLS made partial withdrawals in the quarter at the following rates as a percentage of their pension pot after tax free cash:
|Less than 2%||180,321 (71%)|
|2 – 3.99%||32,169 (13%)|
|4 – 5.99%||7,243 (3%)|
|6 – 7.99%||5,862 (2%)|
|8 – 9.99%||4,442 (2%)|
|10% or more||24,396 (10%)|
Those aged 55 to 59 made the highest level of withdrawals as a percentage of their pension pot, with 27 per cent of these customers taking an income of 10 per cent or more of their pot after any tax free cash was deducted.
The FCA requested data from a sample of 95 pension providers, including all life insurers who reported pension reserves of more than £2bn on their Annual Insurance Returns and all non-life insurance personal pension operators with more than £500m of assets under administration.
This accounted for 71 firms, with a further 24 firms selected for good coverage by taking every fifth firm in the remaining population ordered by size of pension assets.
Fifteen providers in the sample had pension policies with Guaranteed Annuity Rates. Overall, 68 per cent of GARs were not taken up; a figure which includes customers who are too young to exercise their GAR.
This trend was higher in small pots, according to the regulator, where 79 per cent of those with pensions below £30,000 with a GAR did not take them up.