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Savers withdraw almost £2.5bn from their pension pots

Annuities that provide income for life are proving more popular with those who have  arger pension pots

4 September 2015

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Almost £27m has been paid out every day by pension providers since the new freedoms came into force on 6 April 2015.

The near £2.5bn worth of payments have been made in the first three months since the changes, with £1.3bn being paid out in cash lump sums (with an average of just under £15,000) while £1.1bn has been paid out through 264,000 individual income drawdown products.

The figures have been released by the Association of British Insurers (ABI) who have praised pensions providers' ability to adapt to the changes, which were hastily brought in and created a lot of fears about the industry's ability to cope with customers' demand.

Dr Yvonne Braun, director for long term savings policy at ABI, commented: 'These figures are a testament to how well pension providers have adapted to the radical new approach to pensions, which came into force on April 6th.

'They also show the popularity of the reforms. Many thousands of people have accessed their savings to get extra cash as they approach retirement.'

The Association has also revealed that £2.3bn has been used to buy over 37,000 regular income products, either in the shape of income drawdown products or pension annuities.

The liberating effects of the changes can also be seen by the fact that 45 per cent of customers who purchased an annuity changed their provider.

This figure increased to 55 per cent for anyone purchasing an income drawdown product.

Braun believes that although the new freedoms are letting people tailor their financial income to their own needs, there still needs to be a stronger emphasis on the benefits of creating a savings culture.

'Working out how we pay for our growing life expectancy is a vital issue for the UK. The pension freedoms should be able to play an important role in helping retirees shape their income to suit their financial needs over the rest of their lives.

'However, people will only be able to benefit fully if they have been able to build up enough in savings during their working lives. Creating a stronger savings culture is therefore crucial.'

She added: 'Meanwhile annuities, which guarantee an income for life, and income drawdown are proving attractive to those with larger pension pots.'

 

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Pensions