“The headline figure of around a third of a million pensions being withdrawn at rates of 8% or higher will inevitably raise questions about long-term sustainability.
“For some retirees, particularly those relying heavily on defined contribution savings to fund retirement, withdrawal rates at this level may increase the risk of exhausting their pension pot earlier than expected.
“However, this data only tells us how much is being withdrawn, not whether those withdrawals are appropriate.
“Some retirees will have other sources of income or wealth, while others may be deliberately drawing down pension savings over a shorter period rather than planning for a retirement lasting several decades.
“Pensions are there to support living standards in retirement, not simply to be preserved indefinitely.
“Indeed, with future inheritance tax changes likely to increase focus on spending pension wealth during retirement, higher withdrawal rates will not always be a sign that savers are making poor decisions.
“What this data does highlight is the growing need for better support at retirement.
“An 8% withdrawal rate may be entirely appropriate for one saver and wholly unsuitable for another, depending not only on their personal circumstances and objectives, but also on their wider household finances, including a partner’s income, pension arrangements and other sources of wealth.
“That is why the development of guided retirement solutions could prove so important over the coming years.
“Pension freedoms gave savers flexibility over how they access their money, but the industry is still grappling with how best to help people turn pension pots into sustainable retirement incomes.
“The direction of travel is promising, but designing solutions that can deliver good outcomes across a highly diverse retiree population remains a significant challenge.”
Andy Zanelli, head of technical engagement at Aberdeen Adviser:
“First-time access has now surpassed one million plans a year, and the rate of growth continues to outpace anything happening on the supply side of the advice market.
“With adviser numbers flat at around 31,000 and firm numbers falling, it’s clear that a rising share of these decisions risk being taken either without professional support, or with support that falls short of full regulated advice.
“Slower growth of 10% in the number of pots entering drawdown after a larger increase the previous year looks like normalisation rather than any change in consumer preference, and drawdown remains the destination for the clear majority of pots being accessed for the first time.
“The cumulative population of drawdown plans requiring ongoing review continues to grow regardless of what happens to annual sales.
“A flat advised share of plans accessed confirms that the advice gap in decumulation is structural rather than cyclical.
“Adviser numbers have been stable at around 31,000 for three years while the volume of pots reaching access age has risen sharply, and no amount of capacity discipline within the existing model closes a gap of that shape.
“That is precisely the reasoning behind targeted support, and this figure is the baseline it inherits.”
Maurice Titley, commercial director of data and dashboards at Lumera:
“The latest figures show that more savers are accessing their pension pots, while the total value withdrawn has risen by more than a fifth over the past year.”
“The rise in the proportion of larger pension pots being accessed, alongside the increase in people taking a Pension Commencement Lump Sum, highlights the importance of ensuring savers have the right support when making decisions about how and when to access their retirement savings.
“These choices can have significant implications for tax and the level of income available throughout retirement.
“As more people reach retirement with defined contribution savings, initiatives such as Guided Retirement and Targeted Support are likely to play an important role in supporting savers to achieve better outcomes.
“However, both initiatives will require providers to be able to leverage data at scale, whether that is to assign members to appropriate default pathways or provide more targeted guidance at the point they access their pension.
“Being able to use data effectively can help providers identify members who may be at risk of unintended tax consequences, and offer more timely support at key decision points.
“As the retirement landscape becomes more complex, providers will need the technology and data infrastructure to deliver this support consistently and at scale.”
