The Association of British Insurers published figures today indicating that savers have taken out more than £1bn in cash withdrawals from their pensions in April and May this year. This is in line with figures announced by Osborne last month.
Savers also took out £800m in payments from income drawdown policies in 170,000 withdrawals since the pension reforms, ABI said.
The data shows that people with smaller pots tend to be cashing them out while those with larger pots tend to be buying a regular income product. The average pot taken was £15,500.
In April and May this year, £1.3bn was also put in to buying nearly 22,000 regular income products, with more than half of this going into income drawdown products rather than annuities.
This figure compares with 2012 when over 90% of the total value of sales were annuities and less than 10% of total sales were income drawdown sales.
Rising to the challenge
“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,” said ABI’s director for long terms savings policy, Yvonne Braun.
“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.”
The ABI data shows that many customers are shopping around for the best deal, with nearly half choosing a different provider when buying an annuity and over half switching when buying an income drawdown product.
Impulse purchases
Iain McMath, chief executive of Sodexo Benefits and Rewards Services, said: “Following the latest pension reforms, a huge amount of money has been spent on impulse purchases and luxury items, putting the financial security of many Britons in jeopardy.
“Pension schemes are in place to support long-term financial planning. As such, employees need to consider the use of medium-term financial planning in order to fund luxury purchases like holidays and cars.
McMath suggested businesses help support staff by implementing financial education or budgeting tools to help employees manage their money.
