Data from Fidelity shows only 25 per cent of its customers in drawdown are taking a regular income, suggesting many people are continuing to work after taking their initial tax-free lump sum.
Those taking an income increases to 35 per cent for advised drawdown customers, and Fidelity also estimates that just over 10 per cent of defined contribution customers who are eligible to access their pots have done so.
Richard Parkin, head of pensions policy at Fidelity, attributed the lack of income being withdrawn once tax free cash has been taken to the fact most people who access cash are actually nowhere near their retirement date, so if they’re not retiring then they have no need to seek an income.
Mr Parkin said the firm cannot be more precise on the reasoning as some customers may have transferred away to access elsewhere but as a general rule, the firm's data shows few people have cashed in their entire pots under the pension freedoms.
This comes in stark contrast to Association of British Insurers' data published earlier this year, which showed savers were withdrawing too much money from their pension pots too soon, as figures show payouts reached £8.2bn in a year since the freedoms were introduced.
Mr Parkin added even for those who are nearer retirement, this group often have a number of sources for guaranteed income streams, such as a final salary pension, so taking income after they’ve taken their 25 per cent tax free cash doesn’t really appeal as they don’t need the money.
He said this is particularly the case for self-invested personal pension customers who are generally focused on maintaining retirement savings for income, or even to leave to loved ones.
He said: "We do see higher rates of cash out on defined contribution (DC) schemes but this is largely where account values are very small. In fact over half of our activity in this business is from people taking small pots under £10,000.
"Annuity purchases are still way down on where they were pre-freedom. While we have seen increased interest in annuities in recent months volumes are still only 25 per cent or so of what we saw before April 2015.
"We do see people accessing pensions ahead of their normal retirement date. In our DC business over half of members accessing have more than 5 years to go to their stated retirement date."
Robert Lewis, director of operations at Flintshire-based Heritage Financial Solutions, said: "To be honest we would mirror those statistics. We have seen a similar picture from our own existing clients and new enquiries we’ve had.
"I can only recall a small number of scare cases where clients initially wanted to fully encash their pension plans, however once the tax issue had been raised with them, they quickly changed their strategies."
ruth.gillbe@ft.com
