This page provides analysis of the latest data from firms on the retirement income market.
We have been collecting data on the retirement income market since April 2015. The data enable us to monitor developments in the market, for example, to gain insights into what action consumers take the first time they access a pension pot.
We started collecting data from all regulated firms that provide retirement income products from 1 April 2018. The data we collected and published for previous periods were drawn from a representative sample of firms. The following analysis focuses on the latest data covering the year from 1 April 2018 to 31 March 2019 (2018/19). Given the change in the reporting population, we advise users to be careful if comparing data for 2018/19 to those for previous periods.
- Key findings
- Underlying data
- Retirement income choices
- Advice/shopping around
- Withdrawal rates
- Defined benefit scheme (DB) to defined contribution plan (DC) transfers
- About the data[1]
Key findings
- Just over 645,000 pension plans were accessed to buy an annuity, move into drawdown or take a first cash withdrawal in 2018/19.
- 4 in 10 of all the pension pots accessed had a value of less than £10,000.
- Over 350,000 pension pots were fully withdrawn at the first time of access; 90% of which were less than £30,000 in value.
- 48% of plans were accessed without regulated advice or guidance being taken by the plan holder. 37% of plans were accessed by plan holders who took regulated advice and 15% by plan holders who did not take advice but received Pension Wise guidance.
- 40% of regular withdrawals were withdrawn at an annual rate of 8% or more of the pot value.
- Pension providers covered by our data return received 57,000 defined benefit (DB) to defined contribution (DC) pension transfers.
Underlying data
The underlying data for the tables and charts in our analysis are provided in Excel tables which you can download below. We have also included published data for prior periods. In some cases, there are additional data in the tables not shown in our summary analysis.
Chart tips: hover over data series to view the data values and filter the data categories by clicking on the legend.
Retirement income choices
Table 1: Number of plans accessed for the first time by method of access
|
2016/17 |
2017/18 |
2018/19 |
||||
|---|---|---|---|---|---|---|
|
Method of access |
Plans |
Share |
Plans |
Share |
Plans |
Share |
|
Plans used to buy annuity |
76,109 |
13% |
70,866 |
12% |
73,977 |
11% |
|
Plans entering income drawdown and not fully withdrawn |
167,193 |
29% |
188,450 |
32% |
190,971 |
30% |
|
Plans with first UFPLS payment and not fully withdrawn |
16,326 |
3% |
20,566 |
3% |
26,738 |
4% |
|
Plans fully withdrawn* |
319,586 |
55% |
310,448 |
53% |
354,844 |
55% |
|
All plans |
579,214 |
590,330 |
646,530 |
|||
*By plan holders accessing their plans for the first time via small pot lump sum, drawdown or uncrystallised fund pension lump sum (UFPLS).
Note: for reporting periods up until 31 March 2018 the data were sourced from a sample population of firms and the figures for periods up to and including 2017/18 reflect this population only. We estimate that when we began collecting the data our sample of firms covered approximately 95% of the market. From 2018/19 onwards the reporting population changed to include all firms who provide these products (over 120 firms reported in 2018/19).
Table 1 shows that just over 645,000 pension plans were accessed in one of four ways for the first time between April 2018 and March 2019 (covering two reporting periods of 6 months each). Over half (355,000) were plans where the plan holder withdrew all the funds in the plan during the reporting period, having not previously accessed it. A further 3 in 10 (191,000) were plans that entered into income drawdown for the first time during the reporting period and did not have all the funds withdrawn.
There were 74,000 annuity purchases, which have continued to decline steadily as a proportion of all pension withdrawals. The market for annuities is very concentrated - annuities were bought from 23 providers and the top 5 providers accounted for 4 in 5 annuity purchases. By contrast, plan holders entered drawdown with over 100 provider firms and the top 5 providers accounted for only around half of the plans. 26,700 pension plans were also accessed for the first time to take partial lump sum payments from uncrystallised funds (UFPLS). Overall, the share of withdrawals by method of access did not change significantly compared to previous periods (which was for a smaller population of reporting firms).
Chart
Data table
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.
Chart
Data table
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.
Chart
Data table
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).
Chart
Data table
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.
Chart
Data table
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.
Withdrawal rates
Providers reported that in 2018/19 there were 327,500 pension plans where the plan holder made regular withdrawals either by income drawdown or by UFPLS. There were also 141,500 plans from which ad-hoc partial withdrawals were made.
Provider firms which have at least 750 plans with regular withdrawals set up, also report data on the rates of withdrawal as an annualised percentage of the value of the pension pot. In aggregate, these providers have 315,000 such plans with a total withdrawal value of £3.24 billion in 2018/19. These are a potential indicator of whether consumers are making withdrawals from their pension pots at sustainable rates, although we cannot tell from our data whether a plan holder has other pension plans or other sources of income.
Chart
Data table
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.
Defined benefit scheme (DB) to defined contribution plan (DC) transfers
This is an area of focus for the FCA, as we have been concerned about the number of DB to DC transfers taking place and the quality of advice that consumers are receiving. In July 2019, we published CP19/25[5], setting out our proposed measures to change how advisers manage and deliver pension transfer advice, particularly for DB to DC transfers.
Chart
Data table
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.
Copyright
The data on this page is available under the terms of the Open Government Licence[6].