120,000 Savers In Rush To Take Pension Cash

The first official independent figures detailing how new pension freedoms are working for consumers have been released.

The Financial Conduct Authority (FCA), the pension industry regulator has put the data together for the first three months of pension freedom, which started on April 6, 2015.

The figures show:

  • 204,581 pensions have been accessed by consumers under the new rules
  • 71,455 consumers have opted for some form of income drawdown
  • 120,688 consumers have withdrawn cash
  • 12,418 annuities were sold in the period
  • 84% of consumers did not pay their pension provider an exit charge for accessing their pensions

The FCA report notes that many of the largest pension providers are demanding customers take expensive financial advice when transferring funds to another provider offering flexible access – and that this advice is ‘over and above’ statutory requirements.

Transfer times

The regulator also notes many providers are turning down transfers of direct contribution pensions that have safeguarded funds and most defined benefit pensions.

Average transfer times are around 16 days for consumers switching providers – but are as quick as six days in some cases.

Although the majority of transfers and flexible access cases have no fees, 358,000 retirement savers (9%) face charges of up to 2%, 165,000 (4%) pay between 2% and 5%, while around 147,000 (around 3-4%) pay more than 5%.

The figures also show that many retirement savers with money in smaller schemes have to transfer their cash to a larger provider to enjoy flexible access.

Pension firms also told the FCA that they plan to develop new products and services to make flexible access easier for customers.

Pent up demand

“This was the message from 18% of all providers and half of the 15 largest pension firms,” said an FCA spokesman.

“Products on the way include flexi-access pensions and annuities that include long-term care options.”

Some pension advisers suggest the initial figures are skewed by more than the usual number of retirement savers cashing in their pensions to satisfy pent up demand in the market.

“Many of these people would have held off making a decision in the last financial year because they knew that pension freedoms were on the way,” said Andrew Tully, pensions technical director of financial services firm Retirement Advantage.

“It’s also disappointing that some firms are demanding expensive advice for some customers and that a significant minority are paying exit fees of up to 5% of their life savings.”