Nearly two-thirds (61 per cent) of drawdown plans sold in 2020/21 were bought by existing customers, the highest level since pension freedoms were introduced in 2015.

Just Group analysis of Financial Conduct Authority (FCA) figures showed that 100,976 of the 165,988 drawdown plans sold in 2020/21 were to existing customers.

This represents a 2 percentage point increase on 2019/20 and a 6 percentage point rise on 2018/19, highlighting a growing trend of customers staying with their own pension company and not shopping around.

Just Group group communications director, Stephen Lowe, said the figures raised concerns that customers saving with a provider who want to access some cash are sticking with that same provider rather than comparing alternatives that could provide better value.

The firm pointed to calculations by Which? that found the difference between the cheapest and most expensive drawdown plans for a £250,000 pension pot amounted to more than £12,000 over a 20-year period.

“This upward trend raises a red flag whether competition is working well in this area or if providers have a captive audience who don’t have the information or support to compare different services across the market,” Lowe commented.

“Many of those accessing pensions for the first time may be focused more on withdrawing cash and less on the ongoing service and costs applying to their remaining funds.

“We could also benefit from having figures that show how often people who have funds in drawdown, who should receive periodic reviews, choose to switch. In a well-functioning market that would happen, but is it?

“Pension ‘freedom and choice’ hasn’t addressed the issue that many pension savers are heavily reliant on their providers to give them the information they need to make good decisions. The new rules have, if anything, made it more complex to shop around and switch.”

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