The provider has published alarmingly high withdrawal figures for vesting pension customers using the raised triviality threshold introduced in last year’s Budget, with 59 per cent of non-advised customers taking cash post-Budget, compared to just 26 per cent pre-Budget. Royal London says 31 per cent of advised customers are already taking cash, compared to 13 per cent before last March’s Budget. It predicts the percentage of those taking cash to rise even higher once the full flexibility is in place from April 2015.
Those withdrawing cash currently are those with smaller pots, meaning the impact of total funds withdrawn is less significant. While 59 per cent of non-advised customers are now withdrawing fund, Royal London says this only represents 31 per cent of total funds by value. Just 6 per cent of advised clients’ cash is currently being withdrawn.
The proportion of Royal London’s non-advised customers taking annuities has fallen from 70 per cent to 36 per cent, with the amounts transitioning into annuities falling from 87 per cent to 62 per cent. Advised customers going into annuities have fallen from 72 per cent to 45 per cent by number of individuals, and down from 67 per cent to 45 per cent by fund value.
The number of advised customers has increased from 15 to 24 per cent, with 49 per cent of advised assets now held within drawdown, compared to 32 per cent before the Budget.
The provider says it is also seeing large premiums being paid in by wealthier clients looking to take advantage of the estate planning potential of the new rules.
Royal London group product development director Ewan Smith says: “For wealthy customers not so much will change. For those with small funds, it makes sense to pull out all the cash and clear off debt. In between them are the mass affluent however, and we think they are most at risk of making poor decisions. We really need a healthy advice market and the cost of advice to come down. There should be a radical review of the regulations around this and around how people can be helped to make choices through their retirement.”