FCA data reveals pension trends
Most retirees cashing in small pension pots
Two-thirds of Britons have cashed in their entire pension pots, according to new figures, although most of these were small pots.
Of the 178,990 people who accessed their pension fund between July and September last year, 120,969 (68%) took the whole lot out, said the Financial Conduct Authority.
The total number of savers accessing some of their pension fund under the freedoms introduced in April has actually fallen and of the pensions that were fully withdrawn, 88% were small pot pensions (below £30,000). No pension above £150,000 was fully encashed during the period.
Of those that withdrew their entire savings some of those may have invested it in other assets such as property, a business or an ISA, mitigating fears that thousands of retirees have chosen to spend the money on holidays, fast cars and other luxuries.
The FCA said 58,021 pensions were used to take an income after tax-free cash, for example using partial drawdown, partial uncrystallised fund pension lump sum (UFPLS) or to buy an annuity.
Of the 179,990 pensions that were accessed, 60,600 used either partial or full withdrawal UFPLS. 54,604 used income drawdown, both partial or full withdrawals.
One concern is that just 23,385 – 13% – used the money to buy a traditional annuity, which gives them an income for life.
The majority of consumers accessing their pensions stayed with their existing pension provider to do so, with 58% of consumers going into drawdown staying with their existing provider, and 64% of consumers purchasing annuities staying with their existing provide
Richard Eagling, Head of Pensions at Moneyfacts, said: “The FCA data provides a useful insight into how the new retirement freedoms are bedding in, and straightaway alarm bells are ringing with regards to the high number of individuals who are not shopping around for the best deal.
“According to the FCA the majority of consumers accessing their pensions between July and September 2015 stayed with their existing pension provider by taking either a drawdown or annuity product with them.
“These are frightening statistics as they suggest that in all of the excitement surrounding the new options individuals have forgotten the need to shop around for the best deal.
“This issue was highlighted years ago and should have been tackled long before the Government introduced its new package of reforms. Giving people more choice is fine, but if they are not selecting the best value products, then retirement outcomes will not be improved.”