Figures from the Association of British Insurers (ABI) show that the over-55s are increasingly favouring pension income drawdown policies over annuities.
Its research shows that 53% of those buying a retirement income chose an income drawdown policy, while 46% opted for an annuity.
Three years ago, annuities made up 90% of the total policies purchased, but since the pension freedom reforms came into effect in April the demand for drawdown policies has increased significantly, despite some providers failing to offer customers the option to withdraw partial cash sums as the Government intended.
The ABI said that in the two months after 6 April, 65,000 people exercised their new right to withdraw cash – taking out a total of more than £1bn.
It seems that the general trend is for those with smaller pension pots to cash them out, while those with larger pots are using them to buy a regular income. The average cash pot taken was worth £15,500 – however, the average annuity purchase was for £55,750, while the average drawdown policy was for £69,900.
ABI director Dr Yvonne Braun said: ‘Tens of thousands of people are successfully accessing the pension freedoms as intended, and on the whole, the industry has risen to the challenge of giving customers what they want’.