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Savers withdraw £1.8bn in first two months of new pension rules

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
15/07/2015

British savers have withdrawn more than £1.8bn from pension pots in the first two months of the new pension freedom rules.

Nearly a quarter of a million payments were made to pension savers in April and May, according to figures published by the Association of British Insurers (ABI).

Today marks 100 days since the government introduced the pension freedom reforms, which allow savers aged 55 or over total access to their savings.

The ABI data found that £1.3bn has been put into buying regular income products, with more than 50% going into income drawdown products rather than annuities.

In 2012, when annuity sales were at their peak, more than 90% of the total value of sales were annuities and less than 10% were income drawdown sales.

Key stats:

  • Savers have taken out over £1bn in 65,000 cash withdrawals from their pension pots. The average pot taken was £15,500. These cash lump sum payments take advantage of new forms of withdrawal called Uncrystallised Funds Pension Lump Sum (UFPLS).
  • Savers have taken out £800m worth in payments from income drawdown policies in 170,000 withdrawals.
  • Savers have put in £630m to buy 11,300 annuities and a further £720m to buy 10,300 income drawdown policies. This compares to nearly £1.2 billion a month in sales of annuities at the peak in 2012, when only £0.1 million per month was put into income drawdown products.
  • The average annuity was purchased with £55,750 and the average fund put into drawdown was £69,900.

The figures also show that many customers are shopping around for the best deal, with nearly half (45% of sales) choosing a different provider when buying an annuity and over half (52% of sales) switching when buying an income drawdown product.

ABI’s director for long terms savings policy, Dr Yvonne Braun, said: “This is an important reminder that tens of thousands of people are successfully accessing the pension freedoms as intended and on the whole the industry has risen to the challenge of giving customers what they want.

“The data shows people with smaller pots tend to be cashing them out while those with larger pots tend to be buying a regular income product. It also highlights an increase in the number of people putting money into income drawdown products that can take advantage of the new freedoms.

“We are just three months into the biggest overhaul in pensions for a generation which was introduced in only one year, so some issues remain that need to be worked through, in particular around financial advice. This is why we launched our Action Plan to call for a joint taskforce with industry, Government and regulators to work through the challenges and ensure all customers can access their pension in the way they want.”


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