Retirement savers have slowed the rate that they are withdrawing money from their pensions under flexible access rules.
Chancellor George Osborne introduced flexible access in April 2015.
In the first six months of flexible access, pension firms paid out almost £5 billion to retirement savers aged 55 and over.
Since then, the rate of withdrawals has slowed, Association of British Insurers (ABI) director general Huw Evans told the Work and pensions Select Committee of MPs.
The latest statistics are likely to be available for the first year of flexible access within a few weeks.
Investors turn to annuities
MPs were told that the first few months of flexible access led to more money withdrawn due to pent-up demand, but the figures were expected to level out over time.
Many believe flexible access will drop into a pattern of higher withdrawals at the start of the financial year which fall until the start of the next year as savers try to minimise the tax the pay.
Evans also told MPS more retirement savers were reinvesting in annuities that offer a guaranteed income for life rather than drawing cash to spend or hold in the bank.
“We feel customers are showing restraint and common sense,” he said “The trouble is we won’t know for 10 or 15 years whether people are drawing down their pensions too quickly and running out of money in retirement.
“It’s also difficult to work out how much of a pension someone actually gets in their hand.”
Early state pensions for women?
Joanne Segers, CEO of the Pensions and Lifetime Savings Association told MPS that many savers were finding managing their pensions under flexible access a challenge.
“People are becoming their own financial advisers because small savers find the cost of advice too expensive,” she said. “Savers are expected to make informed decisions, but the rules keep changing and are difficult to keep up with.”
Besides examining how the flexible access system is working, the committee has also launched an inquiry into whether some women should be allowed to draw down early on their state pensions.
The aim is to consider whether drawing lower benefits over a longer time would help women ease into retirement without increasing the cost of their state pensions.
