Some savers are withdrawing too much money from their pension pots too soon, according to the Association of British Insurers (ABI), as figures show playouts reached £8.2 bn in a year since the freedoms were introduced (Pensions Financial Advice).
In the first three months of the year, marking the final quarter in the first full-year since the pension freedoms were introduced in April 2015, 4 per cent of UK savers 3,379 had withdrawn at least 10 per cent of their pots.
The data also found many others had chosen to cash in their whole pot in one go.
However, the ABI indicated the majority of savers were taking a “sensible approach” with more than half, 57 per cent of pots seeing withdrawals of just 1 per cent or less during the quarter.
Overall, in a complete year since the reforms, the figures show playouts hit the £8.2bn mark, of which £4.3bn was paid out in lump sum payments averaging at £14,500 and £3.9bn was paid via drawdown payments amounting to an average of £3,800 (Pensions Financial Advice).
Yvonne Braun, the ABI’s director of policy, long-term savings and protection, said: “The data shows the freedoms have been implemented successfully and are working as intended”.
However, she added the data also suggested a minority were withdrawing too much too soon, and said factors such as people having other retirement income, final salary pensions or multiple pots could be at play.
She said: “This is a warning sign that requires further investigation. We need a full picture of these customers’ circumstances and income, which is something we urge regulators and the government to work with all stakeholders to examine” (Pensions Financial Advice).
Figures show sales for annuity products have fallen in the second quarter of this year, with £950 m invested, compared with £1.1bn last quarter.
Ms Braun said the fall in annuity sales in the most recent quarter reflected ongoing pressure on rates”.
She added: “This will not have been helped by the recent decision to lower interest rates to a 300-year low, and further quantitative easing measures” (Pensions Financial Advice).
Pensions Financial Advice
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.
About Us: Churchill Wealth Management is a team of independent financial advisors/financial advisers (IFAs) based in Clifton, Bristol. We provide independent financial advice, including pension advice, investment advice, inheritance tax planning and protection/insurance advice.