Drawdown is by far the most popular choice for advised clients so far this year, advisers have claimed.
Post-pension freedoms, people have been flocking to drawdown for the flexibilities and control it purports to give them over their pension pots.
Although many of these people are entering into unadvised drawdown contracts, either because they cannot afford to, or do not want to, take professional financial advisers, those who are advised are overwhelmingly choosing flexi-access drawdown.
An FTAdviser Twitter poll showed 85 per cent of all financial advisers surveyed claimed their clients had opted for drawdown.
Only 6 per cent selected an annuity, 7 per cent opted for a hybrid between an annuity and drawdown, and the rest took out full encashment, regardless of the potential tax liability.
Source: FTAdviser
This coincides with research from pensions consultancy Willis Towers Watson, which found those people leaving workplace pensions were also heading into drawdown, or a combination of drawdown and other options.
According to Willis Towers Watson, only 10 per cent of those who transferred over the past 12 months bought an annuity.
This was a significant decrease on 43 per cent the previous year.
Some 1 per cent took their funds as cash and 89 per cent chose to take their funds over time through drawdown or a combination of drawdown and other options.
Data from Hargreaves Lansdown, as reported earlier this month (April) by FTAdviser, revealed:
- Approximately 90 per cent of people bought an annuity in April 2015; now this is down to 12 per cent.
- Some 34 per cent are remaining invested and drawing from their pension in some form of drawdown arrangement while 54 per cent are cashing it in.
And it seems the government is committed to boosting drawdown, as well as making it clearer and simpler for the end pension investor.
Earlier this year, the Work & Pensions select committee, led by chairman Frank Field, issued its report on pension freedoms, in which it recommended better drawdown options, a form of default drawdown for consumers and more competition to allow shopping around.
Responding to this, former pensions minister Baroness Ros Altmann said: "The industry needs to develop better standard drawdown options.
"Given the lack of competition, providers have not felt pressure to innovate at the withdrawal phase of pension saving.
"They have stuck to the old drawdown products, which are often expensive and require customers to choose their own investments."
simoney.kyriakou@ft.com
