Revival of annuities

Pension drawdown ‘lower than expected’, says ABI

Pension adviceAlmost £6 billion has been withdrawn since the pension freedom reforms came into force last year.

This is lower than expected, and fewer are cashing in their pot in one go, according to the Association of British Insurers.

Figures for the first nine months since the reforms were introduced show that over 55s who are eligible to access their retirement funds have taken £3bn in 213,000 lump-sum payments, with an average payment of £14,800.

A further £2.9bn is providing a regular income, with an average payment of £3,500.

The figures show how the sums withdrawn have been slowing. About £660m was paid out in cash lump sums during the final three months of 2015. This compares to the £1.3bn withdrawn in the first three months after the rules changed, and the £1.2bn taken out in the following quarter.

There have been signs of a revival in annuities with £3.3bn poured into 61,700 policies over nine months. The average figure invested was £53,000.

ABI director of policy for long terms savings and protection Yvonne Braun said the freedoms are settling in and “working as intended”.

She added: “Following some initial pent-up demand, the number of people accessing their pension pot as cash in one go has settled down. People are taking a sensible approach and considering how they will pay for their whole retirement.”

“Our key challenge remains ensuring people save enough for their retirement. With increasing life expectancy and declining final salary pension provision, we must turn our attention to helping customers grow bigger pots.”

The reforms were introduced last April and abolished the requirement to convert a pension pot into an annuity – a product that provides an income for life.

It gave 300,000 over-55s freedom over their retirement cash in defined-contribution, or money purchase, pensions.

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