FCA data for 2024/25 shows retirees are tapping pension pots more, with withdrawals rising and advice levels worryingly low. Quilter’s Jon Greer warns that simplified guidance is crucial to protect long-term retirement security.
With the latest FCA retirement income market data, out today Jon Greer, head of retirement policy at Quilter, has shared the following analysis:
“The FCA’s latest retirement income data for 2024/25 shows the scale of pressure on retirees’ finances, with more pots being accessed, withdrawals rising sharply, and advice levels still worryingly low.
“The total number of pension plans accessed for the first time rose by 8.6% to 961,575 compared to 885,455 in 2023/24. This continued growth highlights how more people are leaning on their pensions earlier, often to meet rising living costs and fill income gaps elsewhere. Some of the increase will also reflect the demographic bulge of baby boomers reaching retirement age, so part of the rise is structural and will naturally continue in the years ahead. But the real concern is the scale of withdrawals and the lack of advice that accompanies them, which risks leaving many without adequate income later in life.
Surge in tax-free cash withdrawals
“Speculation about possible cuts to tax-free cash in the upcoming budget may also have played a role, with a record £18.3bn of tax-free cash taken in 2024/25 compared to £11.25bn the year before. Prior to almost every budget there are rumours of changes to pension taxation, and while these figures suggest many people are acting on speculation, this is not necessarily the right approach. Any decision to take tax-free cash should be part of a carefully considered financial plan, not a knee-jerk reaction to rumour.
Advice gap and withdrawal risks
“Just 30.6% of people sought regulated advice before accessing their pension, down slightly on the previous year. With nearly seven in ten making complex decisions without professional help, there is a real risk of retirees taking unsustainable withdrawals or making choices that could undermine their long-term financial security. Worryingly, the FCA’s data shows that most people in drawdown are taking regular withdrawals of more than 8% a year, levels at which pots are unlikely to last.
“This is exactly where reforms to deliver simplified advice and targeted support can make a difference, giving people accessible, timely guidance that steers them towards more sustainable decisions without forcing them into a full advice process if they don’t need it.
Drawdown and annuities
“The value taken from pension pots overall leapt by more than a third, rising 35.9% from £52.2bn in 2023/24 to £70.9bn in 2024/25. Drawdown products saw the largest increase in uptake, with sales climbing 25.5% to 349,992, cementing their position as the dominant choice for retirement income. While flexibility remains attractive, it also exposes retirees to the risk of depleting their savings too quickly if withdrawals are not carefully managed.
“Annuities, meanwhile, continued their modest revival with sales up 7.8% to 88,430. Higher interest rates have made annuities more competitive, and while volumes remain far below their pre-pension freedoms peak, more people are starting to recognise the value of securing a guaranteed income in retirement.
Opportunity for reform
“The reality is that too many people are making retirement decisions alone at the very moment when professional input or structured guidance would have the biggest impact. The government’s pensions review and the Advice Guidance Boundary reforms are a golden opportunity to change this. If simplified advice and targeted support are designed well, they could help people make the most of their pensions and avoid decisions that risk leaving them short of income later in life.”
