Pension transfers have doubled since Pension Freedoms
Pension to SIPP and Pension to Pension transfers have risen significantly since the Pensions Freedoms were announced in March 2014, data from not-for-profit Fintech company Origo reveals.
Origo completes around 95% of contract market pension transfers through the Options Transfers service, making its data one of the most reliable when measuring trends.
The data, taken from Origo’s Options Transfers service, which runs from 1 April to 31 March, shows that between March 2014, when the Pensions Freedoms were first announced, and March 2016
Pension to Pension>(P2P) transfers have increased by 74%.
Pension to SIPP (P2S) transfers have increased 115% a possible demonstration of the demand for more flexible products since Pension Freedoms were announced.
In contrast, Pension to Annuity transfers are down 77% between the same two points.
Notably, as many Pension transfers have taken place in the six-months to 30 Sept 2016, as were transferred in a full year pre the Pensions Freedoms announcement.
With over 89 brands using Origo’s Options Transfers service, it has transferred over £85bn since launch in late 2008.
In addition, there has been a distinct shift in the peak ages at which people are transferring their pensions – from age 60, (followed by 55 and 65) pre April 2015, when the Pensions Freedoms came in, to age 55 (followed by 65 and 60) over the past 18 months.
Commenting on the data, Paul Pettitt, Managing Director of Origo, says: “Origo’s Options Transfers figures reflect the significant change in the market since the new pensions rules were announced in then-Chancellor George Osborne’s 2014 Budget speech.
“Annuity transfers fell dramatically almost overnight and it was anticipated that more flexible products that provide income as well as ongoing investment, such as SIPPs, would benefit as a result. This has shown to be case with the 115% increase in transfers into SIPPs.
“The surge in overall volumes since March 2014 would suggest the Pensions Freedoms have had a major impact on the way people engage with their pensions and has prompted them to take action. This may have been to consolidate their pension pots, and/or move them into more flexible pensions products, allowing them to take advantage of the changes in legislation and giving them greater control over their retirement pots.
“The change in the peak age at which people are transferring may reflect people’s desire to switch to the new flexibility from the age at which they can access their pensions – age 55 – with some no doubt undertaking the exercise in order to access their pensions cash.
“While the impact of Pensions Freedoms on the annuity market can be seen in the 77% reduction in transfers overall – for some people an annuity, offering an income for life, can still be the right option. While we only have six-months of figures for 2016 at the moment, transfers into annuities appear to be climbing again, albeit only by a small percentage – roughly projected at 14% for the full year. The March 2017 figures will be interesting in this respect.”
Average size of pension pots transferred:
(over full year/half year)
|Pension to SIPP:
|| £57,245 (03/15*)
|| £58,015 (09/16)
| Pension to pension:
|| £45,950 (03/14)
|| £50,449 (09/16)
| Pension to drawdown:
|| £44,657 (03/14)
|| £51,523 (09/16)
| Pension to annuity:
|| £32,898 (03/14)
|| £41,204 (09/16)
* figures n/a for 03/14