Retirement income market data 2018/19

Figure 1 shows that the number of plans accessed in the second 6 months (311,700) were 7% lower than in the first 6 months (334,800). This was mainly due to fewer full cash withdrawals which were 20,400 (12%) lower in the second period. This is consistent with the pattern we saw in previous periods, with the number of full cash withdrawals lower in the second half of the financial year than the first. 

Figure 2 shows that the value of assets under administration for plans that entered drawdown for the first time in 2018/19 was just over £28 billion (with an average pot size of £147,500). The value of plans used to buy an annuity and the value of those fully withdrawn were around £4.5 billion each, although the average value per pot used to buy an annuity (£61,000) was nearly 5 times that of those fully withdrawn. The value of plans accessed by partial UFPLS was £2.7 billion with an average pot size of just over £100,000.

Figure 3 shows that 4 in 10 pots (252,000) that were accessed in 2018/19 had a value of less than £10,000. Nearly 9 in 10 of these were pots that were accessed for the first time and fully withdrawn. This continues the pattern seen in previous periods; most of the pots being fully withdrawn were small pots – nearly 90% had a value of less than £30,000 and 63% less than £10,000. The average value of pots fully withdrawn at first access in 2018/19 was £13,000. 45% of partial UFPLS withdrawal pots and 44% of annuity pots were less than £30,000 in value.

By contrast, larger pots were mainly accessed via drawdown. 75% of pots over £100,000 that were accessed in 2018/19 went into drawdown but were not fully withdrawn (85% of those with value over £250,000).

Figure 4 shows that over 7 out of 10 plans (466,500) accessed were accessed by plan holders aged 55-64. Most of these were either by full encashment (269,400) or drawdown (143,100).  

Fewer than 2% of plans were accessed by plan holders aged over 75. Annuities were more likely to be purchased by older plan holders – 55% of annuities were taken out by plan holders aged 65 and over. This compares to just 23% of plans for the other withdrawal types. Fewer than 1% of plans were accessed by plan holders aged under 55. Consumers are only permitted to access their pension before the age of 55 in limited circumstances. 

Figure 5 shows that in 2018/19 providers recorded that 48% of plans were accessed without advice or guidance being taken by the plan holder. For 37% of plans that were accessed, the holder was recorded as taking regulated advice. There were a further 15% of plans where the plan holder did not receive regulated advice but did receive guidance from the government’s free Pension Wise service[3]. The total number of plans where the plan holder received Pension Wise guidance is likely to be higher than is indicated by our data as there will be plan holders who received advice who had also contacted Pension Wise. We do not capture these in our data. Also, we capture advice data on new sales only so our data do not give us a picture of the total stock of plans where advice or guidance is received.

The overall pattern by access type is consistent with previous periods (based on a smaller reporting population). For around 45% of plans where the holder bought an annuity or took a partial lump sum withdrawal (UFPLS) they received no regulated advice or guidance. For plans that were fully withdrawn at first access, 62% received no regulated advice or guidance.

For plans that entered drawdown, 34% of plan holders did not take regulated advice (although 9% did receive Pensions Wise guidance). This is a slightly higher proportion than seen in previous periods - in 2017/18 it was 31% (based on a smaller reporting population of firms). We are particularly concerned about non-advised drawdown sales because of the risks of managing drawdown. We published final rules and guidance following our Retirement Outcomes Review (PS19/21)[4] in July 2019, which will introduce remedies designed to help non-advised consumers entering drawdown with their investment decisions.

Our underlying data show that taking advice generally increases with the size of the pension pot. 7 in 10 consumers with pot sizes of £100,000 and over sought regulated advice, whereas only 2 in 10 consumers with a pot size less than £10,000 did. 

Our underlying data for 2018/19 also show that 46% of plans going into income drawdown for the first time were sold to new customers, rather than to existing customers with the firm.  This compares to 43% for 2017/18 (based on a smaller reporting population). New customers also accounted for 46% of annuity purchases (compared to 45% in 2017/18).  For 70% of annuity providers (16 out of 23), annuities were purchased only by existing customers.

Figure 6 shows that in 2018/19, withdrawal rates of 8% and over were the most common rate across all pot sizes except for the largest pots (£250,000 and above in value, where the most common withdrawal rate was 2%-3.99%). Overall, 40% of withdrawals were at an annual rate of 8% and over, and nearly three quarters were at a rate of 4% and over. The proportion of withdrawals at an annual rate of 8% and over has increased compared to 2017/18, when it was 34% (based on a smaller reporting population).

Our underlying data show that even for younger plan holders there were significant withdrawals at rates of 8% and over - 44% of withdrawals for the 55 to 64 age group were at this rate. Just over half of all regular withdrawals were by plan holders aged 65 to 74 and 35% by those aged 55 to 64.

Our underlying data also show that in 2018/19 there were 141,500 plans from which ad-hoc partial withdrawals were made (defined as plans with no regular payment set up, but from which one partial UFPLS or drawdown payment was made in the reporting period). The total value of these withdrawals was £2.65 billion.

Figure 7 shows that pension providers reported receiving just over 57,000 transfers from DB schemes into DC plans in 2018/19. This will not reflect all DB transfers that took place as we do not capture in our data those transferred to occupational pensions or to overseas schemes. The number of transfers in the second 6 months (24,800 received by 76 firms) was down 24% on those in the first 6 months (32,500 received by 83 firms). This was also noticeably lower than seen in the 6 months from October 2017 to March 2018 (34,750), when there was a smaller population of reporting firms. This decline could be due to a range of factors, including a greater awareness of the risks of transfers as a result of increased media attention and FCA supervisory activity. We will continue to monitor this trend.