Retirement savers have cashed in £4.7 billion against their pension funds since April, according to industry figures.
The figures from pension provider trade body the Association of British Insurers (ABI) reveal far more detail about how retirement savers are accessing their money under flexible access freedoms introduced in April.
The headline figures show for pay outs:
- £2.5 billion paid as 166,700 cash lump sum payments, with an average payment of £15,000.
- £2.2 billion paid as 606,000 income drawdown payments, with an average payment of £3,600.
For invested funds:
- £2.85 billion invested in 43,800 income drawdown products, with an average fund of £65,000.
- £2.17 billion invested in 40,600 annuities, with an average investment of £53,300.
The overall picture, explained the ABI, is retirement savers are making sensible decisions about how to invest and spend their pension cash.
Rebirth of annuities
The trend is savers to cash in smaller funds, while those with larger funds are reinvesting their money to give an income in retirement.
Providers also report the first quarter on quarter sales increase for annuities for three years.
Retirement savers converted cash into 22,380 annuities worth £1.17 billion in the third quarter of 2015, compared to 18,200 worth £990 million in the second quarter.
The research also found most savers are shopping around for the best deals rather than sticking with their pension provider.
Around 60% are changing providers to go into income drawdown. The reminder stick with their provider to buy an annuity often because they offer a guaranteed annuity rate that is better than the rates on the open market.
The ABI’s Director for long terms savings policy, Dr Yvonne Braun, said: “Providers are dealing with high demand from pension savers who seem to recognise that annuities can provide guaranteed income for life.
Conflict with ‘inaccurate’ HMRC data
“The market was flat before flexible access was introduced but has revived.
“Our research also shows that the numbers seeking flexible access are levelling out as the first few months probably included handling a pent-up demand from savers who had held off making financial decisions about their retirement until April.”
The ABI figures clarify flexible access data published by HM Revenue & Customs (HMRC) last week which stated 57,750 retirement savers had taken £2.7 billion from their pensions since April.
HMRC pointed out at the time that their figures were incomplete and probably inaccurate.
