Data shows all pension products saw an increase in 2021/22
The Financial Conduct Authority (FCA) published its retirement income market data which showed the total number of pension plans accessed for the first time in 2021/22 increased by 18%.
It was revealed that all products saw an increase in 2021/22, with uncrystallised funds pension lump sums (UFPLS) seeing the biggest increase of 28%.
The overall value of money being withdrawn from pension pots was shown to have risen to £45,638m in 2021/22 from £37,432m in 2020/21, which was an increase of 22%.
However, the number of DB to DC transfers continued to fall from 30,596 in 2020/21 to 26,619 in 2021/22, whilst the number of firms that received a DB to DC pension transfer also fell from 63 to 57.
Andrew Tully, technical director at Canada Life, commented on the FCA retirement income market data:
“(The) data shows that the pandemic paralysis evidenced last year has clearly worn off with pension access increasing by almost a fifth. All products are experiencing a boom in interest. Drawdowns and annuities have also clearly become more popular after experiencing a decline in interest last year.”
Tully explained why he believed people were withdrawing pensions in greater numbers than previous years, and the regularity of these withdrawals, as he claimed:
“This could be a reaction to the pandemic when people generally had less opportunity to purchase some of the big-ticket items such as holidays and cars. On the other hand, this could be the start of people raiding their pensions to plug a gap in income or help younger relatives on to the property ladder.
Many people who have opted to make regular withdrawals from their pensions do so at a rate of 8% or more and it is the most popular withdrawal rate for all pot sizes up to £249,000. While for some, this may be a deliberate strategy to deplete pots in a specific time-horizon if they have other assets to fall back on. For others, this may mean they run out of money in the years to come.”
Tully concluded:
“It’s reassuring to see that a third of plans accessed were by people who had received regulated financial advice. The retirement landscape is complex with plenty of potentially costly pitfalls and a financial adviser will always be best placed to guide you safely through the options.”
The full FCA analysis is available here.
