£4.7bn withdrawn from pensions since April


Almost £5bn has been withdrawn from pensions since the freedoms were launched in April, according to the Association of British Insurers.

Some £2.5bn has been taken out in cash lump sums, the trade body says, while £2.2bn has been paid out through income drawdown products in the first six months of the reforms.

The totals mean that withdrawals have continued at the same levels as the first three months of the freedoms, when the ABI said £2.4bn had been paid out by insurers.

The ABI says that a further £5bn has been invested in either income drawdown or annuity products.

And annuity sales have increased from 18,200 in the three months from April to 22,380 in the subsequent quarter, with the total values sold climbing from £990m to £1.17bn.

This marks the first increase in annuity sales since mid-2012.

The average cash lump sum withdrawal was £15,000 in the first six months, while the average drawdown payment was £3,600.

ABI chairman and Axa UK chief executive Paul Evans says: “As expected, customers are taking smaller pots as cash and using larger pots to secure an income – about 40 per cent with an annuity and 60 per cent with a flexible income drawdown product.”

Evans also notes that 60 per cent of those buying an income drawdown policy changed their provider, while 40 per cent of those buying an annuity shopped around.

ABI long term savings policy director Dr Yvonne Braun adds: “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.

“However, the figures also show that ensuring people save enough for retirement remains our key challenge. With life expectancy increasing and final salary pension provision declining, we must now turn our attention to helping customers grow bigger pots.”

The ABI figures are in stark contrast with those published by HMRC last week on the basis of voluntary reporting, which saw the tax office state that just over £2.7bn had been withdrawn from pensions since April in the form of partial or full withdrawals, money taken from a flexible drawdown account and purchases of a flexible annuity.