The latest figures from the Financial Conduct Authority (FCA) show a significant fall in the numbers of customers cashing out their pensions.
The regulator has published data for the fourth quarter of 2015, obtained from 94 pension and retirement income providers that collectively cover 95% of the post-retirement benefits market.

127,094 pension funds were accessed for the first time in the three month period, whether via an annuity, a drawdown plan, a cash withdrawal or a combination of these methods. This figure represents a fall of 36% from the figure of 197,443 reported in the third quarter.

These 127,094 instances of accessing pension funds were made up of:

• 65,610 full cash withdrawals – this remains the most popular way of accessing retirement savings, but this figure is down by as much as 42% when compared to the July to September figure of 113,100. The proportion of customers choosing this method also fell from 57.3% to 51.6%
• 37,150 new drawdown plans (excluding the plans used to make a full withdrawal)
• 21,289 annuity purchases, down by 9% from the previous figure of 23,385. However, the proportion of retirees choosing to access their savings via an annuity rose from 11.8% to 16.8%
• 3,045 partial cash withdrawals via the Uncrystallised Fund Pension Lump Sum (UFPLS) method

68% of the purchases of drawdown plans, 42% of the annuity purchases, 37% of the full withdrawals and 34% of the partial withdrawals via UFPLS were made after the customer sought regulated financial advice. (In the third quarter, 58% of drawdown buyers and 37% of annuity buyers sought advice in this way).

14,955 pensions with Guaranteed Annuity Rates (GARs) were accessed between October and December, and the proportion of GARs not taken up remains high, at 63%, even if this is slightly down on the figure of 68% reported for the preceding three months.

Many customers are still not shopping around, with 53% of the drawdown plans and 57% of the annuities sold to existing customers of the provider. The equivalent figures in the third quarter were 58% and 64% respectively.

Most customers are still making only small withdrawals from their pension pot. When looking at pension pots where regular withdrawals are being made through drawdown or UFPLS, 86% of these withdrawals involved taking less than 4% of the pot. Only 5% of withdrawals involved taking more than 10%, although the curious state of affairs in which younger retirees withdraw more continues – 11% of customers aged 55 to 59 withdrew more than 10%.

Stephen Lowe, group communications director at annuity provider Just Retirement, said:

“As we head into the second year of pension freedoms some of the initial excitement has worn off to be replaced by what seems to be a more practical attitude.

‘Pent-up demand for full cash withdrawal that resulted in eye-watering amounts of money being stripped out of pensions has moderated.

Claire Trott, head of pensions technical at pensions administration firm Talbot and Muir, said:

“The most notable drop is in those accessing their whole fund as cash and this isn’t really a surprise, it would have been those individuals who would have been able to encash their funds quickest and easiest, so I can see this figure continuing to fall to a reasonable level over the next few quarters.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.