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ABI publishes latest data one year on from pension freedoms reforms

Latest data from the ABI shows that one year since the introduction of the Freedom and Choice reforms, customers are taking a common sense approach with initial demand for cashing in pensions settling down.

Annuities are also starting to see a revival in popularity and the number sold outstripped income drawdown products for the first time in the most recent quarter with 21,200 sold, worth £1.1 billion, compared with 19,700 drawdown policies, worth £1.4 billion.

Overall, since the reforms came in in April 2015, the figures show for pay-outs:

  • £3 billion has been paid out in 213,000 cash lump sum payments, with an average payment of £14,800.
  • £2.9 billion has been paid out via 835,900 income drawdown payments, with an average payment of £3,500.

Since the reforms came in, for funds invested in new products:

  • £4.2 billion has been invested in 63,600 income drawdown products, with an average fund of £66,000.
  • £3.3 billion has been invested in around 61,700 annuities, making the average fund invested nearly £53,000.

A detailed breakdown of these statistics is provided in the ABI pension statistics factsheet.

The ABI’s Director of Policy for Long Terms Savings and Protection, Dr Yvonne Braun, said:

Yvonne Braun"One year on from the pension reforms, the freedoms are settling in and working as intended. This is a credit to providers who worked incredibly hard to get ready for the changes with less than a year to implement them.

"Following some initial pent up demand, the number of people accessing their pension pot as cash in one go has settled down. People are taking a sensible approach and considering how they will pay for their whole retirement. Annuity sales are beginning to see a revival, with more annuities than drawdown products sold in the last quarter. This shows people still really value a lifelong guaranteed income.

"Our key challenge remains ensuring people save enough for their retirement. With increasing life expectancy and declining final salary pension provision, we must turn our attention to helping customers grow bigger pots."

Notes for Editors

Data is up to end of Q4 2015 and includes Legal and General.

What is income drawdown?

Income drawdown allows savers to take out regular amounts of money while their money remains invested. Payments can be adjusted over time. The figures include people who had policies in drawdown before the reforms came in.

What are cash lump sums?

Cash lump sums are also known as Uncrystallised Funds Pension Lump Sums (UFPLS), a term introduced by the Government. Savers can use this method to withdraw their pension as a single lump sum, or to take a number of lump sums from a pension whenever they choose.

In September 2015, the FCA published a pension freedoms data collection exercise: analysis and findings.

This included some figures that were different to the ABI’s Q2 2015 data, particularly on annuity and drawdown sales.

The FCA data covers a larger number of firms than the ABI data, and the FCA’s data request was intended to capture the options that pension providers’ customers had taken, rather than sales. In many cases, the FCA data does not include external annuity sales, and for some firms, the FCA data includes customers continuing in drawdown as well as those starting drawdown.

The FCA drawdown data also includes a greater proportion of full cash withdrawals and withdrawal of tax free lump sums, where this is enabled via drawdown.

Last updated 01/07/2016