Retirees 'operating restraint' under new pension freedoms

Pension savers have collectively accessed £15.74 billion since retirement freedoms came into force in 2015, figures show.

In the final quarter of 2017, 198,000 people took flexible payments from their pension pots, compared with 162,000 in the fourth quarter of 2016.

Around £1.5 billion of payments were made in the fourth quarter of 2017, compared with around £1.56 billion in the fourth quarter of 2016, HM Revenue and Customs (HMRC) figures show.

The freedoms were introduced in April 2015 to give over-55s more options over how they use their retirement cash, rather than being required to buy an annuity retirement income.

Concerns have been raised that some savers may risk running out of cash if they siphon too much out of their pots.

But Nathan Long, senior pension analyst at Hargreaves Lansdown, said: "Rather than use pensions to splurge on an extravagant Christmas, retirees have operated restraint when managing their pensions, showing the new rules are bedding in nicely and the amount being withdrawn is stabilising."

Tom Selby, a senior analyst at AJ Bell, said: "Average withdrawals per quarter continue their downward trajectory, hitting a new low of £7,596 - more than £2,000 less than the figure recorded in quarter four 2016.

"While this is not in itself evidence that savers aren't at risk of making unsustainable withdrawals from their pensions, it equally isn't a smoking gun requiring emergency regulatory or Government intervention."

Sir Steve Webb, a former pensions minister who is director of policy at Royal London, said: "These new figures show that withdrawals under pension freedoms are now settling down to a steady level.

"Roughly 200,000 people are using the freedoms each quarter and are withdrawing a steady £1.5 billion per quarter.

"This is very much the new normal and suggests that a significant number of those at or in retirement continue to value the flexibility given by the new legislation.

"However, it remains important that individuals take expert advice to make sure that the withdrawals from their pension fund are sustainable in the long term."

Gavin Perera-Betts, chief customer officer at workplace pension scheme Nest, said: "It's great to see people taking control over their savings, but without the right support and regulatory structures in place savers are at risk from fraud, paying more in charges and taxes, missing out on investment growth, and either running out of money too soon or underspending their pots.

"We want to see schemes and providers offering default options in addition to a thriving and competitive advice market."