Hargreaves Lansdown says the market for drawdown is likely to exceed the Pension Policy Institute’s “conservative” maximum estimate of 3.1 million.
Research from the PPI suggests between 1.6 million and 2.1 million people aged 55-75 will be able to meet the minimum income requirement for £20,000 either in 2010 or by the time they reach their state pension age.
In addition, the pensions research body estimates 900,000 to 1 million people in this age bracket would be able to use capped drawdown in 2010 or by their state pension age, assuming a defined contribution pension pot of at least £100,000 is required to use capped drawdown.
Hargreaves Lansdown head of pension research Tom McPhail (pictured) says the PPI’s assumptions are conservative because people will use drawdown in a variety of ways.
He says: “I think the PPI estimates are conservative. They appear to have drawn a line and said anyone who has a pot of less than £100,000 isn’t even going to do capped drawdown.
“My contention is that you’re going to see quite a lot of people using drawdown for fixed term annuities, as a supplement to their spouses pension and so on.”
Although 2.1 million people could meet the MIR, the PPI says only 700,000 people aged between 55 and 75 will have enough DC pension benefits on top of their secure pension income of £20,000 to take advantage of flexible drawdown in 2010 or by their state pension age.
PPI research director Chris Curry says: “The research suggests a relatively small number of individuals will be able to make use of the Government’s new flexibilities.
“However, in the future a great number of people may be able to take advantage of both capped and flexible drawdown as more individuals build up DC pension funds and the market for annuities and drawdown products develops.”