Andrew Tully comments on the FCA retirement income market data
The FCA today released its retirement income data for 2022/23 (Retirement income market data 2022/23 | FCA).
A summary of the data is detailed in the table below.
| 2021/22 | 2022/23 | |||
|---|---|---|---|---|
| Number of plans | Monetary value (£000) | Number of plans | Monetary value (£000) | |
| Total pots accessed for first time | 705,661 | 45,638,188 | 739,535 | 43,199,189 |
| Annuities purchased | 60,574 | 5,153,150 | 59,163 | 4,060,947 |
| New drawdown policies entered into and not fully withdrawn | 205,641 | 31,794,619 | 218,074 | 29,867,353 |
| Pots where first partial UFPLS payment taken and not fully withdrawn | 36,271 | 3,693,212 | 41,571 | 4,002,707 |
| Full cash withdrawals from pots being accessed for first time* | 395,235 | 4,997,207 | 420,727 | 5,268,182 |
It shows:
- Slightly more pots (4.9% higher) were accessed for the first time in 2022/23 than in 2021/22 (739,535 vs 705,661).
- However the monetary value was down, suggesting more people took out slightly lower value withdrawals.
- The percentage of customers using the different solutions has remained broadly constant.
- In monetary terms the majority of funds go into drawdown.
- In customer numbers most take full cash withdrawals.
- Sales of annuities fell slightly, which is probably a surprise given rates have generally been good.
- The number of DB transfers continued to fall.
Andrew Tully, Technical Services Director at Nucleus Financial, said: “The effects of the cost-of-living crisis will unfortunately be felt for years to come, so it’s no surprise to see greater numbers of people making withdrawals from pensions than in the previous tax year. We have recently conducted some consumer research which revealed that 74% of UK adults cite ‘affordability’ as one of the issues that negatively affects their retirement confidence. That figure rises to 81% of those aged between 45-54. Many people need to access their pension while still working to pay unexpected bills or help wider family.
“Drawdown will remain the key retirement solution for many as it gives the flexibility to cope with changing needs in retirement. Given the ongoing freezing of the tax thresholds, being able to vary income to ensure it is taken as tax efficiently as possible is a key benefit. The increase in advised annuity sales isn’t a surprise given the significantly higher rates. But blending drawdown with a guaranteed income may give a better outcome than solely using an annuity.
“Given the range of retirement options available, it is important consumers get good advice at the point they first access their pensions savings and on an ongoing basis to work out the best options for their individual circumstances.
“Drawdown advice can be complex, covering areas such as the sustainability over a long time period; the ideal investment options; and tax advice, including how to pass on wealth efficiently to family. Advisers need to be clearly documenting their advice as that is one of the areas the FCA focused on during its retirement income advice review.”
Enquiries:
Linda Harper
Head of Public Relations - Nucleus Financial Platforms group
E: newsroom@nucleusfinancial.com
T: +44 (0) 7876 145309