The latest FCA retirement income data for 2023/24 reveals a significant shift in pension access and withdrawals, reflecting ongoing economic pressures and evolving strategies within retirement planning.

The total number of pension plans accessed for the first time surged by 19.7%, reaching 885,455 compared to 739,652 in 2022/23. 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. In 2023/24, just 30.9% of plan holders took advice, down from 32.9% in the previous year. 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 Labour government has stated that its pension review will aim to address these concerns by evaluating current policies and proposing measures to ensure retirees can sustain their income throughout retirement. This review is expected to prioritise clearer guidance and support, helping individuals make informed decisions and avoid detrimental financial mistakes.

It’s likely to be aligned with the Advice Guidance Boundary review which aims to examine at the regulatory boundary between financial advice and other forms of support and address this issue. This review seeks to ensure that consumers can access the help they need, whether through regulated advice or more general guidance, without facing unnecessary barriers or confusion. The ultimate goal is to help more people access some form of assistance before they embark on their retirement strategies, ensuring they make the most of their pots and avoid hugely detrimental mistakes.

Withdrawals and annuities sales up

Elsewhere in the data, the value of money being withdrawn from pension pots saw a marked rise. The total withdrawals increased by 20.6%, climbing from £43,233 million in 2022/23 to £52,152 million in 2023/24. This increase reflects not only higher pension access but also that people are raiding their pensions more to meet the higher costs in their lives.

One of the most notable trends is the sharp rise in annuity sales. After years of declining popularity, annuities made a significant comeback, with sales rising by 38.7% to 82,061 in 2023/24, up from 59,163 the previous year. Years of low interest rates made annuities less popular but following the rise in the base rate, its 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.

Defined benefit transfers down

The data also shows a steep decline in Defined Benefit (DB) to Defined Contribution (DC) transfers, which fell from 18,080 in 2022/23 to just 7,181 in 2023/24. This may be a sign that fewer people are willing to trade the security of a guaranteed income for the flexibility of a DC scheme, potentially reflecting a shift in confidence amidst market volatility. Similarly, many DB pots are inflation-linked and therefore people have witnessed first-hand 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.

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