Cost of living pressures have led to a significantly higher number of people accessing their pension funds, according to the latest data from the Financial Conduct Authority.
The FCA figures show that 885,455 people accessed their pension plans for the first time in the last tax year — an increase of almost 20 per cent on the previous 12-month period.
The overall value of money being withdrawn increased by a similar margin: a total of £52,152m was withdrawn from pension pots in 2023/24. This is almost £10bn more than the year before, an increase of 20.6 per cent.
Less than a third of people (30.9 per cent) accessing their pension for the first time took regulated advice. This figure is down from the 32.9 per cent opting for advice in the previous year.
The figures show that there was a significant increase n the number of people opting to buy an annuity – as pricing became more favourably on the back of interest rate rises. A total of 82,061 people bought an annuity in 2023/24, up 38.7 per cent on the 59,163 annuities that were sold the year before.
Sales of drawdown though also increase with 278,977 shifting their pensions into these plans, up 27.9 per cent on the year before.
The figures also show the number of DB to DC transfers continued to fall, down from 18,080 in 2022/23 to just 7,181 in 2023/24.
Quilter head of retirement policy Jon Green says these figures reflect the ongoing economic pressures many people found themselves under. “This substantial increase indicates that more individuals are turning to their pensions to manage their financial needs, likely influenced by the cost-of-living crisis forcing people to dip into their pension pots to supplement other forms of income.”
He adds that it was worrying that the number of individuals seeking regulated advice before accessing their pensions for the first time continues to decline. “This ongoing drop suggests that more people are navigating the complexities of pension withdrawals without professional help, raising concerns about the long-term sustainability of their retirement strategies.”
He adds: “The Labour government has stated that its pension review will aim to address these concerns by evaluating current policies and proposing measures to ensure retirees can sustain their income throughout retirement. This review is expected to prioritise clearer guidance and support, helping individuals make informed decisions and avoid detrimental financial mistakes.”
He adds: “ One of the most notable trends is the sharp rise in annuity sales. Years of low interest rates made annuities less popular but following the rise in the base rate, it’s clear many more people are lured by the benefits of the secure income an annuity can provide.”
Broadstone senior manager Rob Hillock adds: “The increase in annuity rates has fed through into a significant rise in sales through 2023/24 as pension savers rush for security and to lock in elevated rates. Given annuities offer peace of mind that retirees’ money will not run out during retirement it is perhaps unsurprising that more attractive rates have led to a surge of popularity.
“Overall, the picture in the retirement income market is of more people reaching retirement with DC pensions leading to an increase in access and money flowing into these products. It is disappointing therefore to see that usage of regulated advice has dipped with just one in three pensions accessed for the first time receiving regulated, independent support.”
