The changes to the pensions landscape have been widely heralded as the most significant in decades and have enabled many to take more control of their finances in retirement. 

BlackRock’s workplace pensions business has seen 1,152 people over the age of 55 decide to exercise these new pension freedoms since April 6, representing total pension assets of £13.4m. The data shows that: four in 5 people (83 per cent) have chosen to take all of their pension savings in cash. This group represents 57 per cent of assets.

An emerging group of savers – 3 per cent (31 people) – have opted for BlackRock’s new income drawdown product. However this group represents 23 per cent of assets – nearly £1 in every £4. 14 percent of retirees have opted for traditional annuity products, representing 20 per cent of assets. A significant proportion of people have sought help with their decision, with 34 per cent taking formal financial advice and 61 per cent accessing the Government’s PensionWise service; within these groups 21 per cent sought counsel from both.

Paul Bucksey, head of BlackRock’s UK Defined Contribution business, said, “The early signs indicate the emergence of a new norm. The pension freedoms have changed the way people are choosing to access their retirement savings – and for the better in our view, as people are using them to take more control of their finances. We were ready from day one and have been successfully paying out cash payments without exit fees, and also setting up new drawdown accounts for those who are looking for greater flexibility and want to remain invested.”

‘Dash for cash’

Since April 6, people have eagerly taken advantage of new freedoms, with the majority taking cash payments. Of the 83 per cent who have taken their entire pot in cash, 20 per cent have taken an uncrystallised funds pension lump sum and 63 per cent have taken a small pot, less than £10,000.

Drawdown appeal for those with larger pots

For those with substantial retirement savings and investments, drawdown has attracted some interest. One pound in every four is now flowing into BlackRock’s drawdown offering – the BlackRock Retirement Income Account – from 31 scheme members with an average pot size of £138,154. The trend towards drawdown products is significant in BlackRock’s view, given these offer an alternative to traditional annuities. Paul Bucksey continues, “We have not been surprised by the take up for drawdown as an alternative to annuities. What this early data shows is that many people want to retain as much flexibility as possible. The BlackRock Retirement Income Account enables retirees to take a regular income which can be varied at any time, whilst continuing to benefit from investment exposure to markets.”