What has happened since the pension reforms?
The new pension freedoms that came into effect in April 2015 were expected to change pensioner and “soon to be pensioner” behaviours. What has happened?
37% of homeowners over 55 said they planned to buy a new property, and 14% said their future plans were as a direct response to pension changes.
However, buy-to-let mortgage approvals are growing more than four times the rate of first-time buyer mortgages at the moment, so this sector remains strongly supported.
Pensioners have directly responded to the changes by opting not to buy a pension annuity; annuities have fallen in value considerably: £3.1bn in Jan-Apr 2013, £1.8bn in 2014 and down to £1bn this year. Not only has the value of annuities fallen, but the number of annuities bought has also fallen steadily from90,000 in the second quarter of 2013 to just 17,800 in 2015.
As an alternative to pension annuities, pensioners can use Income Drawdowns – this is essentially taking money out of your pension pot and treating it as an income. Drawdown sales have soared, namely because everyone can now access them with no restrictions. The total value of drawdown products sold to June 2015 reached £1.3bn compared with just £670m last year.
Source: Telegraph. http://www.telegraph.co.uk/finance/personalfinance/special-reports/11865691/How-weve-used-the-new-pension-freedoms.html