Over £1.8bn withdrawn since pension freedoms

In the same period £1.3 billion was put in to buying nearly 22,000 regular income products, with over 50% of this going into income drawdown products rather than annuities. In 2012, when annuity sales were at their peak, over 90% of the total value of sales were annuities. Less than 10% of total sales were income drawdown sales.

The ABI data also shows that savers have taken out over £1billion in 65,000 cash withdrawals from their pension pots. The average pot taken was £15,500. These cash lump sum payments take advantage of new forms of withdrawal called Uncrystallised Funds Pension Lump Sum.

Savers have taken out £800m worth in payments from income drawdown policies in 170,000 withdrawals, and have put in £630m to buy 11,300 annuities and a further £720m to buy 10,300 income drawdown policies. This compares to nearly £1.2 billion a month in sales of annuities at the peak in 2012, when only £0.1 million per month was put into income drawdown products.

The average annuity was purchased with £55,750 and the average fund put into drawdown was £69,900.

The data also shows that many customers are shopping around for the best deal, with nearly half (45% of sales) choosing a different provider when buying an annuity and over half (52% of sales) switching when buying an income drawdown product.

ABI’s Director for Long Terms Savings Policy, Dr Yvonne Braun commented:

“This is an important reminder that tens of thousands of people are successfully accessing the pension freedoms as intended and on the whole the industry has risen to the challenge of giving customers what they want.

“The data shows people with smaller pots tend to be cashing them out while those with larger pots tend to be buying a regular income product. It also highlights an increase in the number of people putting money into income drawdown products that can take advantage of the new freedoms.

“We are just three months into the biggest overhaul in pensions for a generation which was introduced in only one year, so some issues remain that need to be worked through, in particular around financial advice. This is why we launched our Action Plan to call for a joint taskforce with industry, Government and regulators to work through the challenges and ensure all customers can access their pension in the way they want.”

Mark Stopard, Head of Product Development at Partnership, commented:

“Following the announcement of the Pension Freedoms in March 2014, many put their retirement plans on hold until they could access the funds in their pension pot. These figures clearly show that while the wave has crested and those with smaller pots (£15,500) have taken the cash, others are still looking to convert their retirement savings into an income.

“Following the dire predictions of a year ago, it is good to see that retirees have chosen to use £630 million worth of pension savings to purchase a guaranteed income in the form of an annuity and a further £720m to buy drawdown policies. When asked, 64% of people say they want a guaranteed income in retirement so we believe that annuities have an important role to play in this brave new world.  

“One small cause for concern is that fewer people than hoped appear to be shopping around despite the introduction of the Pension Wise guidance service – this is definitely something we hope to see more of in the future. As the market settles into a more normal pattern and we begin to see more new products launched, it will be interesting to see how it develops going forward.”