Since April 2015, when the pension reforms came into effect, £2.85bn ($4.4bn, €4bn) has been invested in 43,800 income drawdown products, with an average fund of almost £65,000.
An additional £2.17bn has been invested in 40,600 annuities, making the average fund invested nearly £53,300.
Common sense prevailing
ABI found that, overall, people are taking a common sense approach when making decisions about their retirement.
Smaller pots are generally being taken as cash; with £2.5bn paid out in 166,700 cash lump sums, and £2.2bn paid out via 606,000 income drawdown payments.
Larger pots, however, are still being used to access retirement income.
Annuity sales up
Annuity sales reported their first quarter-on-quarter increase for the last three years during the third quarter; selling 22,380 products worth £1.17bn, compared with 18,200 products worth £990m in the previous quarter.
ABI data reveals that people are also shopping around to find the best deal. Six-in-10 investors are changing provider when buying an income drawdown policy.
This compares with 40% of customers who bought an annuity, where customers are often offered guaranteed annuity rates by their existing provider.
Behaving rationally
“The ABI has announced [Tuesday] that in the first six months, customers have received £2.5bn from their pension savings as a cash lump sum – averaging £15,000 each. In the same period customers have invested £5bn to buy an income – averaging £60,000 each,” said ABI chairman Paul Evans.
“As expected, customers are taking smaller pots as cash and using larger pots to secure an income – about 40% with an annuity and 60% with a flexible income drawdown product. Around half are now switching away from the company they saved with to secure the best deal for their retirement income.
“Overall, customers appear to be behaving rationally, and I think we can all be proud of the speed with which we responded to help the government’s reforms succeed,” Evans stated.
