British pensioners have withdrawn more than 1.8 billion pounds ($2.8 bln) from their retirement pot in the two months since the government gave them the freedom to spend it on whatever they wished, the UK insurance trade body said.
The British government introduced a series of changes to the pensions and savings industry earlier this year, including higher thresholds for tax-free savings and the removal of the obligation to buy an annuity at retirement.
While the government set up an impartial guidance service, many in the industry were concerned that would not be enough to prevent some retirees from making a bad call about where to invest their money.
The Association of British Insurers said on Wednesday that those with small pots were cashing the money out, while those with larger pots were buying income drawdown products rather than annuities, which provide an income for life.
The figures for April and May show nearly a quarter of a million payments were made from pension pots, the ABI said.
Over the same period, 1.3 billion pounds was put in to buying nearly 22,000 regular income products, with over 50 percent of that figure going into income drawdown products rather than annuities.
That compares with 2012, when annuity sales were at their peak, when more than 90 percent of the total value of sales were annuities and less than 10 percent of total sales were income drawdown sales, the ABI said.
“This is an important reminder that tens of thousands of people are successfully accessing the pension freedoms as intended … The data shows people with smaller pots tend to be cashing them out while those with larger pots tend to be buying a regular income product,” said the ABI’s director for long- term savings policy, Yvonne Braun.
“We are just three months into the biggest overhaul in pensions for a generation which was introduced in only one year, so some issues remain that need to be worked through, in particular around financial advice,” she said. ($1 = 0.6416 pounds)