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Aegon: FCA data shows total number of people accessing their pension for the first time falls by 12% during pandemic

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Kate Smith, Head of Pensions at Aegon, comments on the latest retirement income market data from the FCA.

  • Latest FCA data shows total number of pension plans accessed for the first time decreased by 12% in 2020/21
  • However, there has been an increase in individuals regularly withdrawing from their pension at a rate of 8% or more
  • Number of people taking regulated financial advice when accessing pension for the first time fell by 3% from 2019/20 to 2020/21
  • DB to DC pension transfers have plummeted by nearly half (46%) from 2018/19 to 2020/21

Kate Smith, Head of Pensions at Aegon comments:

Overall, there has been no dash for cash during the coronavirus with the total number of pension plans accessed for the first time decreasing by 12% from 2019/20 to 2020/21. It is encouraging people have exercised restraint during a period of stock market volatility. However, there has been an increase in those regularly withdrawing at an annual rate of 8% or more. The rate at which you withdraw income in retirement is a crucial consideration to ensure you have enough money to maintain an income throughout life. Taking out too much too quickly means people could outlive their retirement savings.

“The data shows a 3% fall in 2020/21 in the proportion of people who have accessed their pension for the first time with regulated financial advice. Retirement decisions are hugely important and there is a risk that without professional advice people could make decisions that may not be in their best long-term interest, particularly during these times of huge uncertainty caused by the pandemic.”

DB to DC transfers:

“The defined benefit (DB) to defined contribution (DC) pension transfers market continues to contract, with the number of transfers plummeting by nearly half since 2018/19*. This is reflective of firms who remain active in this market, which has fallen sharply in recent years**. Aegon research has shown general business risks, PI cover challenges and FCA supervision activities to be the main drivers of this***. It is important the ongoing supply of advice in this market continues to meet demand or people will be unable to weigh up their options of accessing their pensions flexibly.”

References:

*56,824 in 2018/19 vs 30,596 in 2020/21: https://www.fca.org.uk/data/retirement-income-market-data-2020-21

**https://www.fca.org.uk/data/defined-benefit-pension-transfers-market-data-october-2018-march-2020

***Aegon research with Next Wealth. Managing Lifetime Wealth: retirement planning in the UK 2021 Report. The research was conducted with 212 financial advisers between 3 and 11 December 2020. Yearly comparisons are offered to the January 2020 report conducted with 227 financial advisers.

 

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