Advised drawdowns up 12% as FCA signals retirement income probe

The regulator's latest data on the retirement income market, published today (October 6), showed 6,232 more advised drawdown sales were done this year compared to last year, an increase from 53,164 to 59,396 between March 2021 and 2022.

While the number of advised sales is yet to recover to pre-pandemic levels - in 2019 they sat at around 66,000 - the more recent increase is notable after steady falls in previous years.

People are withdrawing money from their pensions in far greater numbers than last year.Andrew Tully, Canada Life

Meanwhile, the number of those choosing not to take advice has grown by an even larger 21 per cent between March 2021 and 2022, from 29,570 to 35,727.

Despite advised drawdown sales beginning to increase again, the gap between advised and non-advised drawdowns has widened again slightly, with the proportion of advised drawdowns now sitting at 57 per cent, compared with 58 per cent last year.

The data also noted a 24 per cent increase in people entering drawdown in 2021/22 to over 205,000, compared with the previous year of 165,988.

Yesterday (October 5), the FCA said it was "increasingly turning" its focus to retirement income strategies following its work on defined benefit pension transfers in recent years.

The regulator said it is keen to understand more about it and is in the “evidence gathering” stage, harbouring concerns over the size of the market, the amount of money, and the decision making process.

Since 2014, advisers have been airing their concerns over drawdown misselling, a year before tax rules for drawdown were made more flexible in 2015.

The rise in the number of people accessing their pensions for the first time will inevitably spark fears of savers raiding their retirement pots to make ends meet during the cost-of-living crisis.Tom Selby, AJ Bell

In its data today, the watchdog recorded an 18 per cent surge in the number of pension pots accessed for the first time in 2021/22. The value of money withdrawn from pensions during this period also rose by an even greater 22 per cent, from £37bn to over £45bn.

“Today’s data shows that the pandemic paralysis evidenced last year has clearly worn off with pension access increasing by almost a fifth,” said Canada Life’s technical director, Andrew Tully.

“People are withdrawing money from their pensions in far greater numbers than last year…Drawdowns and annuities have clearly become more popular after experiencing a decline in interest last year.”

Annuity sales rose 13 per cent, from 60,383 in 2020/21 to 68,514 in 2021/22.

AJ Bell’s retirement policy head, Tom Selby, said the rise in the number of people accessing their pensions for the first time will inevitably spark fears of savers raiding their retirement pots to make ends meet during the cost-of-living crisis.

“While in some cases savers may feel dipping into their pension is the only option, it’s important to take the time to consider how decisions taken today will impact on your finances further down the line," he said.

“The key to making drawdown work is to carefully consider the sustainability of your withdrawal plan, understand and be comfortable with the risks you are taking, and review your strategy regularly, ideally with a regulated adviser."

Selby added: “If your investments hit the skids, particularly in the early years of retirement, you might need to tighten your belt to keep your withdrawals on a sustainable path.”

ruby.hinchliffe@ft.com