Twelve months later, the situation is exactly the same. Business continues to boom, and advisers and providers alike are still awaiting details of exactly how this scrutiny will increase. But there have been subtle changes to the way drawdown preferences are perceived and dealt with, by industry and regulator alike.
The common thread over the past 12 months has been the FCA’s retirement outcomes review. An interim report was published last July, followed at length by the final report at the end of June this year.
The wider context is that the full implications of the pension freedoms sea change will not emerge for some time yet. Opinion can be canvassed about the ways in which consumers are engaging with their drawdown options, but it will take many years before potential faults in areas such as sequencing risk become apparent.
In the meantime, the number of retirees opting for drawdown arrangements continues to rise. Our survey this year encompasses 35 providers – one more than in 2017, albeit via the inclusion of some different companies – meaning it is once again a representative sample of the industry. Table 1 shows that many providers have seen a material increase in customer numbers over the year. Rapid growth rates are observable at smaller firms, such as Alltrust, as well larger providers like LV. Both have seen a 20 to 25 per cent rise in customers over the period.
There are signs that growth rates are starting to come back down to earth, however: around half of those who disclosed figures achieved growth rates of between 4 and 12 per cent. At worst, these levels are sustainable rather than disappointing, and a drop-off is hardly surprising given the industry’s rapid rise since 2015.
One caveat is that this year’s survey is a month earlier, meaning the period since the last analysis is 11 months rather than a full year. But any resultant hit to figures is likely to have been offset by the defined benefit (DB) transfer boom that continued throughout 2017.
James Jones-Tinsley, of Barnett Waddingham, says the “pent-up demand” released with the introduction of pension freedoms “has now had time to work its way through”. But with drawdown continuing to prove twice as popular as annuities in the new era, and a wave of retirees on the horizon as a result of demographic trends, the sense is that this is still just the start.