“Urgent need for better at-retirement support” – Steve Webb, LCP

The Financial Conduct Authority (FCA) has today published new data for 2023/24 on the retirement income market, showing how consumer behaviour at retirement is changing in terms of choice between annuity/ drawdown/full encashment, the use of financial advice, and the latest data on DB to DC transfers.

Key results are:

• Although annuities remain far less popular than drawdown or cashing out in full, annuities sales rose sharply, from 59,163 to 82,061 – up 39%.
• Take up of drawdown also increased, by 28%, from 218,183 to 278,977.
• Full encashment remained the most popular option, especially for smaller pension pots;  around 470,000 pots were taken out in full in 2023/24, up from around 420,000 in the previous year. However, a slightly smaller percentage of pots were cashed out in full compared with previous years – around 53% in the latest year compared with around 57% in 2022/23.
• Use of financial advice declined slightly, from 32.9% in 22/23 to 30.9% in 23/24;  this means that more than two in three at-retirement decisions are taken without advice.
• The volume of DB transfers slumped again, with just 7,181 transfers in the most recent year compared to 18,080 in 22/23.

Commenting, LCP Partner Steve Webb said:

“These figures show that we still have a very long way to go on the DC savings journey. Most savers build up relatively small pots and cash them out in full, and we urgently need to get to the stage where pots are large enough to take gradually over retirement. The drop in the use of financial advice increases the need for the FCA to complete its review of the boundary between financial advice and guidance. Hundreds of thousands of people take their pensions each year with no advice, and much more needs to be done to help them make well-informed decisions.”