FCA admits pension freedoms cash-out blunder

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FCA figures on the proportion of people who fully cashed out their pension during the second quarter of the freedoms are wrong, Money Marketing can reveal.

Since the retirement freedoms were launched in April the regulator has published two sets of quarterly data designed to show how consumers are responding to the reforms.

The latest statistics, for the three months to September last year, suggest over two-thirds (68 per cent) of pensions were fully cashed out during the period.

However, Money Marketing can reveal the figure – widely picked up in the national press – is incorrect.

As part of the data collection exercise, the regulator asked providers for data on pensions accessed. This is based on sales information supplied by providers.

However, firms were only asked to provide data on the number of pensions fully cashed out in the ‘withdrawals’ section of the information request – which includes both new sales and existing policies.

The regulator then mistakenly applied this number to the sales figure to generate the inflated 68 per cent figure.

The FCA is removing reference to the 68 per cent figure following questions from Money Marketing.

An FCA spokeswoman says: “In our recent report into retirement data we included some data on the numbers of people cashing out their pension pot. In response to a specific query we have revised the published version of the report.

“The 120,969 figure relating to customers fully cashing out their pension in the quarter is correct.  This includes customers who were accessing their pension for the first time in the quarter as well as existing customers who were already in retirement income products.

“We have removed the figure of 68 per cent of new customers fully cashing out their pension, as the total customer numbers include some existing customers.

“We intend to publish a corrected figure shortly as soon as we have obtained and analysed some extra data from firms. However, on the basis of all the data we hold presently, we do not expect a material shift in this number and it is still clear that a large proportion of consumers are cashing out their pension in full.”

AJ Bell head of technical resources Gareth James says: “The initial figures were surprising to us because they were not in line with the behaviour we have seen from our customers. It’s good to see that the number of people fully cashing out their pension may not be as high as initially thought.”