16 April 2024
If you are covering the FCA's Retirement income market data 2022/23, please see the following comment from Kirsty Anderson, retirement specialist at Quilter:
“The latest FCA retirement income data suggests the cost-of-living crisis continued to exert pressure on pension withdrawals in the fiscal year 2022-23. The total number of pension plans accessed for the first time increased by 4.8%, reaching 739,535 compared to the previous year’s figure of 705,666. Despite the increased number of plans accessed, the overall value of money withdrawn from pension pots decreased. The total withdrawals amounted to £43,199 million, down from £45,638 million in 2021/22—a 5% decrease.
“These figures suggest that the rising costs of energy and food compelled people to dip into their retirement funds with more people accessing their pensions to help stay afloat, albeit perhaps reluctantly due to the reduced amounts being withdrawn.
“If you find yourself with no other option but to take income flexibly now, be aware that this decision could limit your ability to save into a pension again in the future due to the Money Purchase Annual Allowance (MPAA). However, in the Chancellor’s 2023 spring budget he took steps to assist pension holders by increasing the MPAA from £4,000 per year to £10,000, providing some relief for those accessing their pensions and wanting to continue with future contributions.
“Notably, the most significant growth occurred in UFPLS (Uncrystallised Funds Pension Lump Sum) plans accessed for the first time. These plans surged from 36,271 in 2021/22 to 41,571 in 2022/23, representing a substantial 14.6% rise.
“Conversely, sales of annuities experienced a decline. The number of annuities sold decreased from 68,514 in 2021/22 to 59,163 in 2022/23, reflecting a 13.6% drop.
Fewer accessing advice
“As the cost-of-living crisis persists, individuals must carefully navigate their retirement options, seeking professional advice and considering the long-term implications of their choices. However, the data also show fewer people are seeking regulated advice prior to accessing their pensions for the first time. According to the FCA, 32.9% of plans accessed for the first time in 2022/23 were accessed by plan holders who took advice, down from 33.4% in 2021/22.
“Despite the introduction of the ‘stronger nudge to pensions guidance’ in June 2022, this morning’s figures from the FCA also suggest that the number of people booking Pension Wise guidance appointments has also fallen.
“Guidance offers a valuable resource for those looking to go it alone when they access without advice and explain the different options available, but the stronger nudge has not provided the expected boost to the take-up of guidance sessions since its implementation.
“Our experience is that many customers looking to access their pension savings already have a good idea of the action they wish to take and often do not feel they need guidance, particularly where they have already received financial advice. However, it is worrying that so many people who do not seek advice still appear to be opting out and going ahead without support. Taking guidance at this stage in life is a long way from becoming normalised.
“Something needs to change to ensure more people get help in making what is ultimately one of the biggest financial decisions they will ever make. Particularly when decisions made in the early years of accessing a pension can have long term implications on pension growth and income sustainability. The limited use of such a valuable resource that has been clearly signposted suggests the stronger nudge comes too late in the process.”
