More people taking flexi-access drawdown

The greater flexibility offered by the pension freedoms has resulted in more people taking their pension as flexi-access drawdown. The following chart shows how the overall market for annuities has drastically reduced in the last few years.

Fig 1: Chart showing the fall in annuity sales over two years

For the funds invested of £5.0 billion since April the ABI has said £2.2 billion has been used to buy 40,600 annuities making an average fund size of £53,300. Another £2.8 billion has been used to to invest in drawdown products with an average fund size of £65,000.

From the data about 40% of people buying an annuity use the open market option to take the fund with another provider. For flexi-access drawdown this increases to 60% taking their fund to a new provider.

Pension funds taken as cash or income

There are £4.7 billion that is take from the existing provider either as cash or income payout. About £2.5 billion is paid out as cash lump sums as 166,700 transactions with an average of £15,000 predominately smaller funds. There was another £2.2 billion paid out in 606,000 income payments with an average of £3,600.

The ABI’s Director for Long Terms Savings Policy, Dr Yvonne Braun, has said an increasing number of people are recognising the value of a guaranteed income, with annuity sales rising this quarter.

There are also initial signs that the number of people accessing their pension pot as cash is beginning to settle down, with larger pots continuing to be used to buy retirement income products.