New Pensions Policy Institute (PPI) research has looked at the evolution of the DC retirement market.

Since pension freedoms from April 2015, behaviour has changed. More people access their pension pots earlier and in many cases before retirement. More than half of DC pension pots accessed during this period have been fully withdrawn, while a third have entered drawdown and annuity sales have declined to around 13 per cent of pots accessed.

But there are many aspects of this market that are unknown, such as how multiple pots fit together on a personal and household level, and there is a lack of holistic data to fill in those blanks. We will not be able to evaluate the outcomes of these decisions for some time. The changes observed in the past three years are not necessarily representative of the retirement income decisions people will make in the future.

That is because future retirees are likely to live longer and take their state pension later. As a result of auto-enrolment they are also likely to reach retirement with a greater reliance on DC savings, and because of the decline in defined benefit schemes low levels, if any, of DB entitlement. They will also have near total flexibility in accessing their pension savings.

This suggests that over time there will be an increase in the number of people reaching retirement where DC is the major component of their pension wealth, and who are at risk of making decisions that could have a significant negative impact on their retirement outcomes.

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