Drawdown sales have more than doubled year-on-year, while new annuity business has crashed 64 per cent, latest ABI stats show.
Over 11,000 drawdown contracts were sold in Q4 2014, a rise of 109 per cent year-on-year, compared to just 5,482 in the same period in 2013.
However, annuity sales continue to decline. Sales fell 27 per cent between Q3 and Q4 2014, from 39,246 contracts sold down to 28,712. This is a 64 per cent decrease year-on-year, with some 80,537 annuities sold in the last quarter of 2013.
People with smaller pension pots are more likely to abandon annuities and move into drawdown, the stats show.
The average pot size for an annuity increased 27 per cent year-on-year, from £33,000 to £41,900, while the average pot size for drawdown fell 37 per cent, from £91,400 to £57,600.
Some 62 per cent of annuities sold were to internal customers in Q4 2014, up from 52 per cent a year ago, meaning external annuities are bearing the brunt of the slowdown in annuity purchase.
Enhanced annuities’ share of the market remains flat, at 28 per cent of sales.
ABI retirement policy manager Rob Yuille says: “These figures show savers with larger pension pots continuing to buy annuities, while others are entering drawdown with smaller funds than in the past.
“More people are clearly taking cash, but many are still making an active choice to buy an annuity with a small pot. This reflects the diverse needs and preferences of the population and is a reminder that savers should not be pigeon-holed or told their choices are wrong, but need advice or guidance to help them find the right solution for them.”