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Some over 55s withdrawing ‘too much’ under pension freedom rules

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15/08/2016
A minority of savers are “withdrawing too much too soon” from their pension pots and risk running out of money in a decade or less, the Association of British Insurers (ABI) has said.

However, data showing saver behaviour in the first complete year since the pension freedom rules came into force (from April 2015 to April 2016), suggests the majority of over 55s are taking a sensible approach to withdrawing money from their pots.

It showed 57% of people withdrew 1% or less of their pot in the first three months of 2016.

However, four per cent of people withdrew 10% or more of the value of their pot.

“There may well be other factors at play here, such as people having other retirement income, for instance, final salary pensions or multiple pots. But this is a warning sign that requires further investigation,” said Yvonne Braun, the ABI’s director of policy, long term savings and protection.

In terms of what people are doing with their money, sales of annuity products fell in the January to March period, with £950m invested, compared to £1.1bn the previous quarter.

Drawdown product sales remained consistent, with £1.48bn invested, compared to £1.49bn the three months before.

In the complete year since the reforms were introduced, £4.3bn has been paid out in 300,000 lump sum payments, with an average payment of £14,500.

Meanwhile, £3.9bn has been paid out via 1.03 million drawdown payments, with an average payment of £3,800.

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