New freedoms see older savers cashing in pension pots
Older savers have collectively cashed in £4.7 billion from their pension pots in the first six months of the new retirement freedoms, according to the Association of British Insurers (ABI).
The number of retirement annuities being bought by savers has also started to edge upwards for the first time in three years, in signs that the freedoms - launched in April - have not killed them off.
The ABI said that generally, smaller pots are generally being cashed in completely, while larger pots are being used to siphon off a retirement income.
Of the total, more than half (£2.5 billion) has been paid out in 166,700 cash lump sum payments, with an average payment of just under £15,000.
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Some £2.2 billion has also been paid out via 606,000 income drawdown payments, with an average payment of £3,600. Drawing money out in this way allows savers to keep their pot invested while taking out regular amounts of money to suit their needs.
Meanwhile, £2.17 billion has been invested in around 40,600 retirement annuities, with the average fund invested at nearly £53,300.
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Some £1.17 billion-worth of annuity sales took place in the third quarter of 2015, compared with £990 million-worth of sales during the previous quarter. The ABI said this was the first quarterly increase in annuity sales since 2012.
The freedoms, introduced on April 6, mean that people aged 55 and over are no longer required to buy an annuity with their retirement pot. Annuities give someone a guaranteed retirement income, usually for the rest of their life, but they have been controversial in recent years due to disappointing rates and people not shopping around to get the best deal.
The ABI's figures showed that 60% of people are changing provider when buying an income drawdown policy, compared with 40% of customers who buy an annuity. Customers are often offered guaranteed annuity rates by their existing provider, which may beat the other deals available.
The ABI's director for long terms savings policy, Yvonne Braun, said: "Despite some ringing the death knell for annuities, this seems to have been premature.
"An increasing number of people are recognising the value of a guaranteed income, with annuity sales rising this quarter. There are also initial signs that the number of people accessing their pension pot as cash is beginning to settle down, with larger pots continuing to be used to buy retirement income products."
