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How Retirees Are Managing Their Pensions: Current Trends in Annuities and Drawdown

Retirees are exploring various options for their pensions. The Financial Conduct Authority (FCA) has released new data showing what choices people are making. Let’s take a look.

 

Are People Buying Annuities?

Annuities were not very popular in 2022/23. Even though annuity incomes were high, sales dropped. This might be because retirees were waiting for interest rates to go even higher.

However, things changed a year later. Annuity sales soared to £5.2 billion. This is a 46% increase from the previous year and the highest since 2014. High annuity rates suggest that sales might continue to rise.

 

Income Drawdown Remains Popular

Income drawdown is still a favorite choice for many. Over 420,000 pensions were fully withdrawn at first access, mostly smaller pots. However, more than 3,400 pots worth over £100,000 were also fully withdrawn, which could lead to big tax bills.

Around 218,000 pension pots went into drawdown, compared to just over 59,000 annuities. But withdrawal rates are high—40% had rates over 8%. This is much higher than the usual 4%.

Large withdrawals can be fine for one-time expenses like weddings or home renovations. But if done repeatedly, it can risk running out of money.

 

The Importance of Advice

In the past, income drawdown was mostly for higher-net-worth individuals and often done with a financial advisor. Now, over half of all drawdown cases still get advice, and some get guidance from Pension Wise. However, more than a third of cases receive no advice or guidance. This lack of support might explain the high withdrawal rates, which could lead to regrets later.

 

Conclusion

Retirement involves major decisions with long-term effects. Before deciding what to do with your pension, make sure you understand all your options and their risks. Seek the support you need to make the best choice for your future.

 

Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom.  Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand.

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