On the go: The number of pension pots accessed for the first time in 2021-22 jumped by 18 per cent, according to new figures from the Financial Conduct Authority.
The regulator’s latest data on the retirement income market, published on October 6, showed the value of money withdrawn from pensions during this period also rose by an even greater 22 per cent, to more than £45bn from £37bn.
The data also noted a 24 per cent increase in people entering drawdown in 2021-22 to more than 205,000, compared with the previous year of 165,988.
“[The] 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 by 13 per cent, to 68,514 in 2021-22 from 60,383 in 2020-21.
Tom Selby, retirement policy head at AJ Bell, 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.”
This article originally appeared on FTAdviser.com
