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FCA: Less than half get advice on cashing out pension pot

Fewer than half of consumers who take their full pension pot as a lump sum use an adviser, new data from the FCA shows.

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Though the proportion of advised full withdrawals increased six percentage points between the second and third quarter of last year, only 47 per cent of consumers had gone through a planner to take their whole pot.

The proportion of advised full withdrawals was as low as 29 per cent in the first quarter of 2016, after falling from 37 per cent in the final quarter of 2015.

Only 33 per cent of annuities were bought through an adviser in the third quarter of last year, the data shows, down from 42 per cent at the end of 2015.

The proportion of advised drawdown purchases remained steady at 65 per cent, however.

The FCA’s data bulletin says: “The highest levels of adviser use continued to be for customers going into drawdown. Changes in this percentage are quite influential over the total advice proportion across the sector because drawdowns provide the second largest volume of new pension access.”


Pension freedoms on the wane

The FCA’s data, which covers July to September last year, also shows a 10 per cent drop in full cash withdrawals, an 8 per cent drop in first-time pension access and a 3 per cent drop in new drawdown policies, indicating that the pace of pension access is slowing nearly two years after the introduction of pension freedoms.

Though annuity purchases had reported a 17 per cent increase between April and June 2016, the latest data shows a 6 per cent fall.

There appears to be a slight improvement in customers shopping around though.

56 per cent of customers chose a drawdown product from their existing provider, down from 59 per cent between April and June. 58 per cent of customers chose an annuity product from their existing producer, compared to 61 per cent the previous quarter.

Retirement Advantage pensions technical director Andrew Tully, says: “I’m very disappointed to see that people are still not shopping around to get the best deal, either for an annuity or drawdown. The message is clearly not getting through so we need to find a way of breaking this cycle.

“We need to think more radically, as the pension freedoms should not be licence for people to receive poor value from their retirement choices. The issue here is to help people get advice. There is a strong correlation between those people who do receive financial advice and the number of people who shop around. I think its high time we had a debate about the merits of introducing a form of compulsion in shopping around.”



30% willing to pay for pension advice

Savers are more willing to pay a financial adviser for help with their pensions than any other area, a Scottish Widows report into workplace savings has revealed. According to the study, published today, 30 per cent of people say they would be happy to pay for pensions advice, more than mortgages (24 per cent), cash […]


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. I’m sure all these figures are very meaningful………

    But what is happening to the money (advised or non-advised) after full withdrawal and or drawdown ?

    This is a vital question that needs to be answered ! and one the FCA needs to be very driven to know the answer…….

    Because if a large chunk of this money is going into scams, funding car parks, student accommodation and any other investment offering terrific unrealistic returns, we may as well all put our tools back in the bag and go home !

  2. I would imagine its all very low amounts and is used to pay off mortgages and credit cards – not everyone with a pension is a victim of a scam.

  3. Human nature is often to get what you can and place it into cash, safe in the knowledge it’s currently losing circa 1-2% p/a.

    Failing that, invest in property which is on the back of a significantly long bull run, doesn’t offer any real tax planning control, is usually reliant on debt to fund the purchase, is also reliant on the quality of the occupier and where asset prices (IMO) are under strain – hence the need for Government intervention.

  4. I’d guess that many of those taking the full sum as cash have such small pots that taking regulated advice is cost prohibitive.

  5. So is this not the perfect nirvana, apart from the enlightenment bit? Government gets its tax, nobody taking advice thus minimal risk and the average guy thinking that at this moment in time this is fantastic. Just like lending people loads of money a few years ago.

    I can’t help but feel that there’ll be an expensive review in say 10 years. Just long enough for all current politicians, regulators et al no longer to be current!

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