More consumers are seeking advice before withdrawing their pension pots while the share of advised annuity purchases is declining, according to the latest data from the regulator.
Financial Conduct Authority (FCA) figures, out on 23 February, show the percentage of advised full encashments has grown steadily in the past year. Whereas in Q1 a mere 29% of encashments had been advised on, that proportion had grown to 47% by Q3 of the year.
However, this also means more than half of the transactions, which continue to be the preferred route of access for the majority of pension pots, are made without advice.
The FCA said: "Unlike the other product types, that have experienced a decrease in adviser use in the latest period, full withdrawal has seen an increase in adviser use, from 29% during January to March 2016, 41% in the previous period (April to June 2016) to 47% in the latest period."
According to the FCA, income drawdown remains the most popular product for advice with two-thirds (65%) of those accessing their pots through drawdown in Q3 doing so with an adviser. However, this was slightly down from the 70% figure seen in the period January to March 2016.
Source: FCAAt the same time the share of advised purchases of annuities dropped 9 percentage points in the last year, with 42% of annuities taken out with the help of a financial adviser in Q4 of 2015, dropping to 38% in Q1 2016 and a 12-month low of 33% between July and September 2016.
Last August, Aegon warned the Bank of England's decision to cut interest rates meant it was the worst time to consider retiring as gilt yields dropped to record lows and said those looking to buy an annuity should consider deferring. This could go some way to explaining why fewer advised clients have taken out annuities in the past year.
Meanwhile, advised uncrystallised fund pension lump sums (UFPLS) - encashments of parts of the pot - have levelled out after a spike at the beginning of 2016, according to the FCA. Advised use of UFPLSs had jumped from 34% to 43% in Q1 2016, but seems to have plateaued since - 44% of transactions took place with an adviser in Q3 of the year.
New pension access falls
Overall, between July and September 145,068 pension pots were accessed by consumers for the first time, to take an income or fully withdraw their money as cash, down 8% when compared with Q2 2016 (145,068), and down 27% when compared with the same quarter in 2015.
The number of annuities purchased fell 6% to 20,538 from Q2 to Q3. Full cash withdrawals by new customers decreased 10% to 79,916 between Q2 and Q3, while the number of new drawdown policies entered into decreased 3% to 41,067.
The FCA said: "Since pension freedoms began in April 2015, there was a gradual decline in the total number of pension pots being accessed for the first time each quarter.
"The greatest level of activity was soon after the reforms and the number of pots being accessed look like they are now fluctuating. The number of full cash withdrawals has declined in the last quarter to 79,916, but it is still the most used product for consumers accessing their pension pots (55% of the total)."
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