The first statistic is that almost £2.5bn worth of payments were made to customers in the three months since the new pension freedoms came in.
Of that, £1.3bn has been paid out in cash lump sums, the ABI said, while £1.1bn has been paid out via 264,000 income drawdown payments.
The second statistic came from the ONS in the shape of the decennial review of English life expectancy, which shows that English life expectancy is improving at a rate of around three years per decade. Or, as Hargreaves Lansdown’s head of pensions research, Tom McPhail, puts it: “Around 20% of men and around 31% of women can expect to survive to at least their 90th birthday.”
The increasing longevity of the population is a well-known phenomenon and brings with it both challenge and opportunity for asset managers. While it means that pension pots have to stretch further, which is an especially difficult problem to solve in the current low-return environment, on the positive side it means that asset managers will be looking after that money for longer as well.
As ABI’s director for long term savings policy, Dr Yvonne Braun, said: “Working out how we pay for our growing life expectancy is a vital issue for the UK. The pension freedoms should be able to play an important role in helping retirees shape their income to suit their financial needs over the rest of their lives.
“However, people will only be able to benefit fully if they have been able to build up enough in savings during their working lives. Creating a stronger savings culture is therefore crucial.”
This is especially the case if clients don’t annuitize immediately, as Rob Williams, head of distribution at Royal London Asset Management, explains: “IFAs are going to be managing money far longer than they used to. If investors are no longer automatically annuitizing at 55, they are going to keep their money in risk assets and that translates into a lot more money being managed by asset managers.”
