Pensions - Articles - Retirement income data show people paralysed by the pandemic

 Andrew Tully, technical director at Canada Life comments on the FCA retirement income market data published today: “The data shows a decline in activity over the last year as people have clearly been paralysed by the pandemic, with many opting to wait for a calmer year before making any long-term decisions around their retirement income. We can see evidence of this in the number of pension plans which have been accessed dropping by 12% and the number of annuities purchased falling by 13%.

 “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 £250,000. 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.

 “Increased regulatory scrutiny on DB to DC transfers is clearly having the desired effect as activity is down by 25%. Advisers have been stepping away from this market for a number of reasons but we know consumer demand is still there. While this is a significant financial decision and it’s important the right regulations are in place to protect consumers, we need to be careful that we don’t leave people unable to get advice as the decision to transfer will be the right one for some people.

 “While annuity sales are still down we can see an increasing number people are choosing to purchase one later in life. Perhaps following a hybrid approach of starting with drawdown then gradually de-risking to an annuity. This makes sense as annuity rates improve as we age due to life expectancy and declining health.”
  

 FCA analysis available here