UK Pension Trends: Drawdown Policies Surge in Popularity
Pension trends in the UK reveal a shift towards flexibility, with drawdown policies becoming increasingly popular among retirees. Latest figures show a significant rise in pension access and a decrease in annuity sales.
In the year to October 2023, 36% of pension pots were used for drawdown, allowing retirees to access their retirement funds flexibly. This is a notable increase from the previous year, with over 218,000 new drawdown policies implemented in 2022/23. Conversely, annuity sales decreased by 14% as retirees favoured the income flexibility offered by drawdown.
The total number of pension funds accessed between October 2022 and 2023 rose by 5% to around 740,000. However, around 57% of these pots were emptied, with most valued at £10k or less. This trend can be attributed to rising living costs and mortgage payments, driving higher withdrawals from pensions.
Defined benefit pensions, once a popular choice for retirement security, are now less favoured. The number of people transferring out of these schemes dropped by 32% due to falling transfer values and increased regulation.
The pension landscape in the UK is evolving, with drawdown policies emerging as the preferred choice for retirees seeking income flexibility. However, cashing out pensions can have tax implications and impact inheritance tax liability and means-tested state benefits. Despite this, rising living costs and mortgage payments continue to drive higher withdrawals from pensions.
