The number of people accessing their pension for the first time surged in 2023/2024, as economic pressures continued to take their toll.
Data from the Financial Conduct Authority showed 885,455 pension plans were accessed for the first time in the 2023/24 tax year, a jump of 19.7% compared to the previous year.
The overall value of money being withdrawn from pension pots also increased over 20% to £52,152 million in 2023/24 from £43,233 million in 2022/23.
However, the number of people taking regulated advice dropped to 30.9% from 32.9%.
Jon Greer, head of retirement policy at Quilter, said: “This substantial increase indicates that more individuals are turning to their pensions to manage their financial needs, likely influenced by the cost-of-living crisis forcing people to dip into their pension pots to supplement other forms of income.
“However, the number of individuals seeking regulated advice before accessing their pensions for the first time continued to decline. This ongoing drop suggests that more people are navigating the complexities of pension withdrawals without professional help, raising concerns about the long-term sustainability of their retirement strategies.”
The FCA data showed sales of drawdown jumped by 28% to 278,977 in 2023/24, while sales of annuities saw the biggest increase, jumping from 59,163 in 2022/23 to 82,061 in 2023/24.
Greer said: “After years of declining popularity, annuities made a significant comeback. Years of low interest rates made annuities less popular but following the rise in the base rate, it is clear many more people are lured by the benefits of the secure income an annuity can provide. Drawdown products also saw a marked increase in uptake, with sales rising by 27.9%, indicating a broader trend toward flexible income options in retirement.”
Rob Hillock, senior manager in the personal financial planning team at Broadstone, said: “The increase in annuity rates has fed through into a significant rise in sales through 2023/24 as pension savers rush for security and to lock in elevated rates. Given annuities offer peace of mind that retirees’ money will not run out during retirement it is perhaps unsurprising that more attractive rates have led to a surge of popularity.”
In contrast, the data showed a steep decline in defined benefit to defined contribution transfers, which fell from 18,080 in 2022/23 to just 7,181 in 2023/24.
Greer said the trend was likely to be driven by people becoming less willing to trade the security of a guaranteed income for the flexibility of a DC scheme. Similarly, many DB pots are inflation-linked and the sharp rise in recent years has proved how valuable that can be for their long-term financial health.
“As more people access their pension savings earlier, it becomes increasingly important for individuals to consider the long-term impact of their decisions, particularly as the number of people opting out of advice continues to rise. Many retirees may struggle to ensure their income lasts throughout retirement,” Greer added.
