PensionsSep 8 2017

FCA data shows fewer people dragging cash out of pensions

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
FCA data shows fewer people dragging cash out of pensions

The number of pension pots accessed between October 2016 and March 2017 fell by 8 per cent, according to data from the Financial Conduct Authority.

It follows a large spike which saw this activity increase by 19 per cent to 302,107 between April and September 2016.

The total number of pension pots accessed for the first time during October 2016 and March 2017 were 276,761.

The number of annuities bought has fallen again after a brief period when they were increasing, with only 33,561 bought during the period, down 21 per cent on the previous six month period and down 16 per cent on the same period last year.

Meanwhile the number of income drawdown policies entered into and not fully withdrawn has remained broadly stable at 83,687, increasing only by 4 per cent on the same period last year.

But there has been a large increase in demand for partial uncrystallised fund pension lump sum payments taken where the pot was not fully withdrawn.

This has remained at a low level compared to other options, with only 8,707 pots involved, but it was down by 16 per cent on the previous six months and by 29 per cent on the same period last year.

The number of full cash withdrawals from pots accessed for the first time has gone down to 150,806 and is mainly concentrated among the smallest pots.

For pots of less than £10,000, full cash withdrawals were used in 86 per cent of cases while it was used in 60 per cent of cases for those worth between £10,000 and £29,000.

As the size of the pot increases, drawdown and UFPLS become more popular, with 81 per cent of pots worth £250,000 or more using the former and 5 per cent using the latter.

Annuities are relatively popular among those with mid-sized pots, with it being used in 20 per cent of cases for pots worth between £30,000 and £99,000.

There were also 32,333 pensions with guaranteed annuity rates that were accessed between October 2016 and March 2017.

In 58 per cent of cases the GAR option was not taken up. Of these, around two thirds were encashed.

This compares with 53 per cent of pensions with GARs that were not taken up in the previous period.

The FCA’s data also showed that customers’ use of advisers differed across each product type and by pension pot size.

Around a third (34 per cent) of customers purchasing annuities used advisers in the latest period, a from two fifths (40 per cent) in the same period last year.

The highest levels of adviser use continues to be for customers going into drawdown. This has remained steady at 69 per cent.

The percentage of drawdown accessed by existing customers of firms has remained relatively static. The FCA said this could suggest customers who access pots early without taking advice may be accepting drawdown from their current pension provider without shopping around.

There was a fall in adviser use among those making full withdrawals from their pension, from 44 per cent between April and September 2016 to 38 per cent in the latest six month period.

Martin Dodd, a financial adviser with Wolverhampton-based Midlands Investment Agency, said: “What happened initially with pension freedoms is those that were waiting to access their pension funds were going to do it at the first available opportunity.

“There were probably a lot of small pots being encashed at that time and what I feel is happening now is there is a far more considered approach.”

damian.fantato@ft.com