People over 55 have not raided their pension pots between April 2020 and March 2021. However, many retirees continue to draw down their pots at rates of 8% and over, while even fewer took advice than a year earlier. 

 

The Financial Conduct Authority’s latest retirement income market data shows that fewer pension plans were accessed for the first time in 2020-21, down 12% to 596,080. 

 

The number of pension accounts that were cashed in fully at first time of access also fell, by 9% to 341,404, and the vast majority of plans that were cashed in – 9 out of 10 – were for pots worth less than £30,000.

 

Perhaps unsurprisingly, given the withdrawal of many advisers from the transfer advice space, defined benefit to defined contribution transfers were down significantly, by 25%, to 30,596. The steep reduction could provide reassurance that fewer DB holders are receiving unsuitable advice or transferring when it is against their interest. 

 

However, there seems to be an increasingly entrenched pattern of some people drawing their pension pot down at high – likely unsustainable – levels, as 43% of regular withdrawals were made at an annual rate of 8% or more of the pot value, up from 42%. 

   

 

    

Meanwhile, the number of plans used to buy an annuity has reduced 13% to 60,383, down from 69,519. 

 

Drawdown, UFPLS and encashments are the preference of younger pension holders, the FCA noted, while 59% of annuities were taken by people aged 65 and over. 

 

“It is encouraging people have exercised restraint during a period of stock market volatility,” said Kate Smith, head of pensions at provider Aegon. 

“However, there has been an increase in those regularly withdrawing at an annual rate of 8% or more," she added, warning that taking out too much too quickly means people could outlive their retirement savings.

 

The reduction in pension transfers since 2018 reflects the fact that fewer firms offer advice on this, Smith noted, putting their market withdrawal down to general business risks, professional indemnity cover challenges and FCA supervision activities, but said: “It is important the ongoing supply of advice in this market continues to meet demand or people will be unable to weigh up their options of accessing their pensions flexibly."

 

Low advice take-up is a concern for regulators and the industry alike. Overall, there has been a 3% fall in the proportion of people who have used regulated financial advice to access their pension for the first time. 

    

“Retirement decisions are hugely important and there is a risk that without professional advice people could make decisions that may not be in their best long-term interest, particularly during these times of huge uncertainty caused by the pandemic,” said Smith.