Number of pension pots accessed for first time falls by 12% in 2020/21

The total number of pension pots accessed for the first time decreased by 12 per cent year-on-year to 596,080 in 2020/21, the Financial Conduct Authority (FCA) has revealed.

Its Retirement income market data 2020/21, which analysed data from the year April 2020 to March 2021, showed that the number of pots accessed had declined from 673,831 in 2019/20.

Of the pots that were accessed for the first time, 33 per cent were accessed by pension holders who took regulated advice, down 3 per cent from 2019/20.

Annuity purchases continued to decline, according to the data, with the number of pots used to buy an annuity falling by 13 per cent to 60,383.

More than half (59 per cent) of the annuities were taken by people over the age of 65.

The number of pension pots fully withdrawn at the first time of access decreased by 9 per cent to 341,404, with nine in 10 of these withdrawals being for pots worth less than £30,000.

Of the pots fully withdrawn, 108,869 were worth less than £10,000, while 1,499 people fully withdrew pots worth more than £100,000.

The number of pots entering drawdown fell from 197,118 to 165,988 during the year, while pots with first crystallised fund pension lump sum payments but not fully withdrawn fell from 31,664 to 28,305.

Almost half (43 per cent) of regular withdrawals were withdrawn at an annual rate of 8 per cent or more of the pot value, up from 42 per cent in 2019/20.

The FCA also revealed that the number of defined benefit to defined contribution transfers received by pension providers fell by 25 per cent in 2020/21, to 30,596.

Just Group group communications director, Stephen Lowe, said the figures showed the impact of the pandemic on people’s decisions to dip into their retirement money.

“The first half of each tax year is usually the busiest for pension access so such a steep drop shows people putting plans on hold, before a rebound back to a nearer normal level in the second six months," he stated.

“The proportion of people fully withdrawing their pensions rose to 60 per cent during the first half but then fell back to around 55 per cent which is more typical.

"We are seeing the rate of withdrawal from income drawdown pots continue to creep higher with the proportion taking 8 per cent or more from their pots each year 43 per cent during 2020/21 compared to 40 per cent the previous year.

“It does raise concerns about sustainability of income with nearly three-quarters of drawdown pots (74 per cent) being withdrawn at 4 per cent or more a year.

“Finally, we have seen the proportion of pots accessed with advice slip again to around one-third and no growth in the proportion taking pensions guidance, a key consumer protection against poor decisions and scams.

“That is worrying because it shows that efforts by the government and regulator to increase use of the free, impartial and independent Pension Wise service are not moving the needle in the right direction and we remain lightyears away from guidance becoming the ‘norm’ for people accessing pots.”

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