The size of an individual’s pension pot is a key factor in determining how they exercise their pension freedoms at retirement, according to research from the Pensions Policy Institute.
In a paper published yesterday the PPI looks at how the introduction of freedom and choice in pensions has opened up new ways for individuals to access their pension savings.
The report is the first in a series of two and also explores the ways in which the freedoms have added to the challenges people face in the run up to retirement.
It says pots that are fully withdrawn are smaller on average than those used to purchase retirement income products with 90 per cent of withdrawn pots worth less than £30,000.
This contrasts with 30 to 46 per cent of pots used to purchase retirement income products.
The average size of a fully withdrawn defined contribution pension pot is £14,500, while larger pots are likely to be used to provide a regular retirement income, either through an annuity or regular patterns of drawdown.
The PPI also draws on FCA figures which show drawdown products are popular across all age groups.
Between October 2016 and September 2017, drawdown product purchases accounted for 30 per cent of those made by people aged between 55 and 64 and 34 per cent for those aged under 55 or 75 or older.
For those aged between 55 and 64, drawdown products were more than three times as popular as annuities, while those aged 75 or older were twice as likely to purchase a drawdown product as opposed to an annuity.