FCA data: Annuity purchases and DB to DC transfers decline

Hannah Godfrey reports...

The number of DB to DC transfers has declined alongside the number of annuities purchased, according to the latest retirement income market figures from the Financial Conduct Authority (FCA).

Between 1 April 2018 and 31 March 2019, some 645,000 pension plans were accessed to buy an annuity, move into drawdown or take a first cash withdrawal.

Of those, 350,000 pension pots were fully withdrawn at the first time of access – 90% of which were less than £30,000 in value.

The number of individuals fully withdrawing their pension decreased as the size of their pension increased. Some 316,605 individuals with pots valued below £30,000 fully withdrew their pension, compared to just 355 individuals with a pot valued at £250,000 and above.

Meanwhile the share of those using plans to buy an annuity has continued to decline. In 2016/17 the number of annuities purchased was more than 76,000, while the latest data from the regulator has shown that figure has dropped to less than 74,000.

Across various age groups, drawdown proved to be a more popular option than purchasing an annuity. Those aged between 65 and 74 appeared to find purchasing an annuity the most appealing, with 38,157 individuals choosing to do so, but drawdown (42,308) and fully withdrawing their pot (77,245) were still more popular options.

Number of plans accessed by age group and method of access in 2018/19. Source: FCA

DB to DC decline

The FCA’s data found the number of defined benefit (DB) to defined contribution (DC) transfers decreased throughout the year, from 32,488 in April to September 2018 to 24,832 in October 2018 to March 2019 – a drop of nearly a quarter (24%.)

At the same time, the number of firms carrying out transfers fell from 83 to 76, a small fall of 8%. The FCA pointed out the data does not reflect the total number of DB transfers that took place throughout the year as it does not capture transfers to occupational pensions or overseas schemes.

Additionally, the research found more than a third (37%) of all plans were accessed by individuals who took regulated advice, while 15% of savers received guidance from Pension Wise. However, nearly half (48%) of plans were accessed without regulated advice or guidance.

AJ Bell senior analyst Tom Selby said: “These figures demonstrate the enduring popularity of the pension freedoms, with almost three people taking a regular income through drawdown for every one person buying an annuity. This represents a monumental shift in retirement behaviour the impact of which will be felt across the UK economy.”