This regulator’s latest retirement income bulletin shows average withdrawal rates have risen from 4.7 per cent to 5.9 per cent over between 2016/17 and 2017/18.
This has prompted fears that some pension members are taking unsustainable incomes streams. The FCA about whether these higher withdrawal rates put pension plan holders at risk in its report.
The figures are part of a wider data set looking at trends in the retirement income market since the introduction of pension freedoms.
This data on withdrawal rates relates to annual payments taken by drawdown or UFPLS. During this time frame the number of plans where holders made regular withdrawals remained almost exactly the same.
The figures show that while the average withdrawal rates had increased, there was also an increase in the number of plans where more than 2 per cent income was taken a year.
The biggest increase was in those taking 8 per cent or more from their pension each year. The number of plans with this withdrawal rate had increased from 72,760 in 2016/17 to 90,356 in 2017/18.
The number taking between 6 an 7.99 per cent income from their pension fund had also increased, from 34.547 to 44,722; while the numbers taking between 4 and 5.99 per cent income had increased from 39,685 to 55,387.
The only withdrawal rate to decrease were those taking less than 2 per cent from their pension pots. Over this period the number of plans using this withdrawal rate had plummeted from 90,581 to 27,963.
The figures show that the higher withdrawal rates are more common on smaller pots. In fact this was the most popular withdrawal rate for pension pots that worth less than £100,000.
However, those with pension pots of between £100,000 and £250,000 were still fractionally more likely to be taking an income of 8 per cent or more a year, than they were to be taking one of the lower withdrawal rates.
However while this data shows withdrawal rates are increasing, it also reveals that the number of people cashing in their entire pension plan fell over this period.
The FCA said that total number of pension pots that have been accessed has remained the same over the past year, but there has been a 9 per cent fall in full cash withdrawals. The vast majority of these (87 per cent) were for pots worth less than £30,000.
The figures also show that sales of drawdown products continue to grow at a faster pace, compared to traditional annuity solutions.
Sales of drawdown are up 8 per cent in the second half of 2017/18, compared to the same period in 2016/18. This compares to just a 1 per cent increase in annuity sales over the same period.
Total inflows into drawdown grew by 27 per cent to £11.1bn in the same period.
The FCA says that data from 2017/18 indicates that 60 per cent of drawdown sales during the period for for zero-income drawdown, where a tax free cash lump sum was paid but no income at all had been taken.
