The data shows that £3bn has been paid out in 213,000 cash lump sum payments in 2015, with pensioners taking an average payment of £14,800. Meanwhile, £2.9bn has been paid out in income drawdown payments, which totalled an average of £3,500.
Pension reforms allowing people unrestricted access to their pension savings were announced by the chancellor George Osborne in April 2014 but came into effect last year.
Cash lump sums
Despite unrestricted access to pensions, ABI’s research found that the amount of cash lump sum withdrawals is actually decreasing, as demand settles following the reforms.
Only £660m was withdrawn in cash in the fourth quarter of 2015, compared to £1.3bn and £1.2bn in the second and third quarters respectively. Furthermore, over half of cash withdrawals were less than £10,000.
Annuities vs income drawdown
According to the ABI, annuities are beginning to see a revival in popularity despite their post-pension freedom fall and are now almost on par with drawdown sales.
In the last quarter of 2015, 21,200 annuities worth £1.1bn were sold – compared with 19,700 drawdown policies worth £1.4bn.
Another key trend highlighted by the data is that people are beginning to prefer using drawdown as a regular income product, with 65% withdrawn in the fourth quarter of 2015 being worth £1,000 or less.
In terms of investments, £3.3bn has been invested in around 61,700 annuities – equating to an average fund of £53,000 – compared with £4.2bn invested in 63,400 income drawdown products that makes up an average fund of £66,000.
Yvonne Braun, director of policy at ABI, said: “One year on from the pension reforms, the freedoms are settling in and working as intended.
“Following some initial pent up demand, the number of people accessing their pension pot as cash in one go has settled down.
“People are taking a sensible approach and considering how they will pay for their whole retirement. Annuity sales are beginning to see a revival, with more annuities than drawdown products sold in the last quarter. This shows people still really value a lifelong guaranteed income.”
