On the go: Retirees are withdrawing funds from their pension pots at unsustainable levels, according to the Financial Conduct Authority’s latest retirement data bulletinpublished today.
An alarming 40 per cent of regular withdrawals were taken out at an annual rate of 8 per cent or more of the pot value. More than 350,000 pots were fully withdrawn during the year, but the vast majority of these (90 per cent) were small pots worth £30,000 or less.
Commenting on the data, Stephen Lowe, group communications director at Just Group, said: “The data raises concerns with more than half (54 per cent) of all pensions accessed last year completely emptied out. More than 350,000 pensions were fully withdrawn with an average size of nearly £13,000, so these are by no means insignificant pensions.
“Overall, 74 per cent of people are taking more than 4 per cent of the fund value each year,” he added.
“This contrasts with guidance from organisations such as the Institute and Faculty of Actuaries suggesting 3.5 per cent would be a more suitable drawdown rate for a 65-year-old, and 3 per cent for a 55-year-old.”
Fewer than 74,000 annuities were bought during the reporting period, which ran from April 1 2018 to March 31 2019.
Tom Selby, senior analyst at AJ Bell, comments: “These figures demonstrate the enduring popularity of the pension freedoms, with almost three people taking a regular income through drawdown for every one person buying an annuity. This represents a monumental shift in retirement behaviour, the impact of which will be felt across the UK economy.”
Forty-eight per cent of plans were accessed without regulated advice or guidance being taken by the plan holder, compared with 37 per cent who took regulated advice and 15 per cent who did not take advice but received Pension Wise guidance.
Mr Selby said: “The nature of the pension freedoms means while some will use their new-found flexibility responsibly, others risk sleepwalking into disaster. Increasing take-up of advice and guidance is crucial to help mitigate this risk.”
The FCA also revealed the number of defined benefit to defined contribution transfers was down 24 per cent, with pension providers reported receiving just over 57,000 transfers from DB schemes into DC plans in 2018-19.
