Drawdown ratios etc

sgx2000

Tried looking for this but could not find any current info...

What percentage of Uk retiree's take the full 25% TFLS as a single lump?
What percentage of Uk retiree's retire using an annuity?
What percentage of Uk retiree's use UFPLS?
Etc etc etc...

In other words I am trying to see what the average habits of UK retiree's is...

Time2Go_25

I don't imaging that information is reported anywhere. Any reason you want to know?

NoMore

Retirement income market data 2022/23 | FCA

Possibly has what you want, don't think it has the 25% lump sum data but has the other data you want I think.

Also not sure how often they update this

sgx2000

Just a weird thought that entered into my head....
Never seen it anywhere....
I would imagine drawdown is more popular than annuity...
But who knows...Given the high current annuity rates??

NoMore

According to the link earlier, the most popular option is encashment (basically taking the lot out), however this is the vast majority of Pensions under 10k in size. Drawdown is second most popular option, followed by UFPLS, then Annuities.

However the size of the Pot does change the ratio of the options, with encashment become less popular as the pot size grows (understandably giving the tax issues).

The data does not link multiple pots to single individuals, so the choice of method of access could also be skewed by this.

dunstonh

I would imagine drawdown is more popular than annuity...

It is but annuity has had a growth spurt over the last year.

According to the link earlier, the most popular option is encashment (basically taking the lot out), however this is the vast majority of Pensions under 10k in size. Drawdown is second most popular option, followed by UFPLS, then Annuities.

I wonder how the data is influenced by regular UFPLS.   For me, that is the most common option used.

sgx2000

dunstonh said:

I wonder how the data is influenced by regular UFPLS.   For me, that is the most common option used.

Thanks for the reply dunstonh
Is the UFPLS option the more common option for you, because you are an IFA (likely to deal with larger pensions)?

I am being made redundant in 3 weeks (64) hooray!
I have been looking at my options for a couple of years now (learning a lot from this forum, and you specifically.. Thank you)
My choices have changed a few times recently, but I have always wondered why anyone would choose flexible draw down over a regular UFPLS.....
Surely leaving your pot un-crystallized gives you more options in the long run.....

gm0

You can buy an annuity with crystallised funds (FAD). Or continue to drawdown income flexibly. There is no difference there

UFPLS viewed as superior for 4 main reasons which are not applicable to all.  Or significance varies

Spreading tax relief from tax free cash across many tax years is still true.

25% tfc outside pension being consumed or gifted.  Is, until consumed inside iht estate - do not die suddenly in early retirement. 

Allowing pot growth uncrystallised so the tfc is 25% of a higher number.   Still true.  But tfc capped unindexed now

Different treatment of uncrystallised and crystallised for inheritance (changed and no  longer as important)

Folk lore takes time to catch up.

Pot size dependent.

The case "for FAD" for some was around age the 75 LTA tests of uncrystallised+crystallised growth net income and the penalty levy Since  abolished,

Linton

sgx2000 said:

dunstonh said:

I wonder how the data is influenced by regular UFPLS.   For me, that is the most common option used.

Thanks for the reply dunstonh
Is the UFPLS option the more common option for you, because you are an IFA (likely to deal with larger pensions)?

I am being made redundant in 3 weeks (64) hooray!
I have been looking at my options for a couple of years now (learning a lot from this forum, and you specifically.. Thank you)
My choices have changed a few times recently, but I have always wondered why anyone would choose flexible draw down over a regular UFPLS.....
Surely leaving your pot un-crystallized gives you more options in the long run.....

1) Some platforms do not support UFPLS or did not in the past..  Or there may be restrictions. II for example support UFPLS but I think each drawdown needs to be individually requested.
2) Drawing down is a bit of a hassle.  Platforms may require you to have the money to be drawn down available in cash two weeks before the payroll is run typically at the start of each month. So some people choose a sinigle annual drawdown.
3) Many people have a need for the tax free lump sum, eg house improvements

Moonwolf

gm0 said:

UFPLS viewed as superior for 4 main reasons which are not applicable to all.  Or significance varies

I think the key point here is "not applicable to all".  I'm not sure I would ever call one method superior, even if it was superior for me.  

When annuity rates are high or if you have a pre-existing condition, particularly if you think will mean that your expected lifespan is underestimate by actuaries then annuity is best. 

Annuities or mixed annuity and drawdown might be best if someone wants certainty or a certain minimum income.

For someone who doesn't expect to need most of their pot and wants to leave it to children, then taking out the tax free element early might be a choice. 

dunstonh

Is the UFPLS option the more common option for you, because you are an IFA (likely to deal with larger pensions)?

I would put the average size (after consolidation) at around £250k that we deal with.      

Most of the people we see don't need a lump sum up front.  So, if there is no need for that, then UFPLS often makes sense.  Sometimes we also combine methods. UFPLS to the personal allowance with 25% element taken on top.  In these case we are using regular UFPLS and phased drawdown for the same person.   That will play havoc with any stats!

My choices have changed a few times recently, but I have always wondered why anyone would choose flexible draw down over a regular UFPLS.....

A lot of people don't know the different options that exist. Or because their existing scheme won't offer them.   For example, this week I have had two people with L&G workplace pensions going into drawdown.  Neither of them offer regular UFPLS.   L&G only facilitate taking the 25% TFC up front.   Not everyone will investigate all the options. Just what their own existing plan offers.

You would not believe the number of new clients that come to us saying they want the 25% out up front because that is how they believe it is done.  We then change their mind to UFPLS.

Surely leaving your pot un-crystallized gives you more options in the long run.....

It does but you need to be careful that you do not waste the 25%.  At 75 (or in the lead up depending on the size of pot), we tend to crystallise any remaining unused tax free cash unless there are estate IHT issues. and divert it back to pension and ISA (£3600 annual contribution rarely would have a recycling issue).  Mainly to avoid tax on death after 75.