Smaller pension pot customers take cash lump sum

The latest annuity data has suggested customers with smaller pension pots have immediately started to use the new freedoms to take their cash lump sum, according to the ABI. The average pot size of an annuity is bigger, new ABI figures released this morning showed. More people with smaller pots have been taking cash following the increased limits announced in the Budget, the report stated.Yvonne Braun, head of savings, retirement and social care at the ABI, said: "It suggests customers with smaller pots have immediately started to use the new freedoms to take their cash lump sum, which is something the industry has campaigned for."The data also shows where customers with small pots choose to annuitise they are increasingly taking enhanced annuities."Although it is too early to determine how customer behaviour will continue to evolve between now and when the Budget reforms come fully into effect in April 2015, there are still a significant number of savers who will want the regular income provided by an annuity."We would expect that many will choose to annuitise later as a result of the new measures."The figures showed sales of annuities have fallen by over a third between the first and second quarter of 2014. {desktop}{/desktop}{mobile}{/mobile} In quarter two of this year 46,368 annuities were sold at a value of £1.79m. This was down from 74,270 sales in quarter one at a value of £2.47m, which itself was lower than the last sector of 2013 when 89,896 were sold, valued at £3.09m.Other key points from today's report included that a greater proportion of annuities were internal, but a greater proportion of those with pots below £5,000 have been switching.A higher proportion of larger pots were being used to buy internal annuities. The ABI said this was likely to be due to people continuing to take advantage of Guaranteed Annuity Rates.Also, the proportion of enhanced annuities purchased, as a proportion of total sales, was unchanged, but of the external annuities sold a higher proportion were enhanced compared with previously.Enhanced annuities also made up a larger proportion of annuities bought with small pots.There has been an increase in sales of income drawdown contracts, but with a smaller average pot size than previously, as some providers reduced their minimum fund size for drawdown in line with the shift in policy towards pension flexibility.Mark Stopard, head of product development, at Partnership said: "Although today's figures do show some positives, there is some cause for concern if you look at the marked difference between internal and external sales."Not only are internal sales only down by 12% (- 40% for external) but just 8% of internals sales are for enhanced annuities (59% external)."This does seem to suggest that some providers are 'making hay while the sun shines' and a number of retirees could receive significantly less income in retirement than they deserve."

Smaller pension pot customers take cash lump sum

Related items

News from Twitter