Just 2% of retirees in the UK will have enough money to meet the government's new minimum income requirement (MIR) and use flexible drawdown arrangements, research suggests.
Estimates from the Pensions Policy Institute (PPI) show only 200,000 people aged 55 to 75 in the UK could meet the requirement of having at least £20,000 a year and enough savings left over to withdraw under flexible drawdown.
The research estimates just 5% of this group in the UK have enough saved to use the capped drawdown arrangements.
PPI research director Chris Curry says: "The research suggests that initially a relatively small number of individuals will be able to make use of the government's new flexibilities.
"However, in the future, a greater number of people may be able to take advantage of both capped and flexible drawdown, as more individuals build up defined contribution pension funds and the market for annuities and drawdown products develops."
The institute says an annuity still remains the best option as the vast majority of people would not be able to handle the investment and longevity risks associated with capped drawdown.
Last year experts warned the the abolition of the requirement to buy an annuity by age 75 and changes to the amount of drawdown income rules would benefit "those who need them the least".
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