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Pension freedoms: £4.7bn withdrawn in first six months

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Savers have withdrawn £4.7bn under the new pension freedoms since their 6 April introduction, according to data from the Association of British Insurers (ABI).

The figures show £2.5bn has been paid out in 166,700 cash lump sum payments, with an average payment of just under £15,000.

Some £2.2bn has been paid out via 606,000 income drawdown payments, with an average payment of £3,600.

Of the money paid out, £2.85bn has been invested in 43,800 income drawdown products, while £2.17bn has been invested in around 40,600 annuities.

The data indicate retirees are acting sensibly, taking smaller pots as cash, with larger pots being used to access retirement income. In total, £5bn has been spent on nearly 84,500 regular income products, such as annuities.

Annuity sales have seen their first quarter-on-quarter increase in three years, with 22,380 worth £1.17bn purchased in the June to September period, compared with 18,200 worth £990m the previous quarter. The last time there was a quarter-on-quarter increase was Q2-Q3 2012.

Retirees are also shopping around for the best deals, with 60% changing provider when buying an income drawdown policy, compared to 40% when buying an annuity.

“The peaceful pension revolution continues. While providers continue to meet high levels of demand, it’s clear people are taking a sensible approach and considering how they will pay for their retirement,” said ABI director of long-term savings policy, Dr Yvonne Braun.

“Despite some ringing the death knell for annuities, this seems to have been premature. An increasing number of people are recognising the value of a guaranteed income, with annuity sales rising this quarter. There are also initial signs the number of people accessing their pension pot as cash is beginning to settle down, with larger pots continuing to be used to buy retirement income products.

“However, the figures also show ensuring people save enough for retirement remains our key challenge. With life expectancy increasing and final salary pension provision declining, we must now turn our attention to helping customers grow bigger pots.”

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