Pension providers have revealed the first year pay-outs under flexible freedoms for retirement savers.
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Figures from trade body the Association of British Insurers (ABI) almost £6 billion top a million retirement savers in the last financial year.
An average of £14,800 was paid in lump sums to 213,000 pension savers, while £2.9 billion was taken as income drawdown by 836,000 in amounts averaging £3,500.
Fewer retirement savers have opted to reinvest their pension cash, the ABI statistics show.
A total of £4.2 billion was switched into income drawdown by 63,600 savers. The average investment was £66,000.
Annuities on the rise
Annuities were the least popular investment – £3.3 billion was invested in the lifetime guaranteed income products by 61,700 investors at an average of £53,000 each.
Predictably, the ABI points out annuity sales beat those of income drawdown as annuities are sold by most pension providers to their customers seeking to reinvest their savings.
Providers sold 21,200 annuities worth £1.1 billion in the past three months, outperforming the sale of income drawdown products of 19,700 worth £1.4 billion for the first time since flexible access started.
ABI director of policy for long terms savings and protection, Dr Yvonne Braun, said: “A year on from when pension reforms were introduced and the system seems to be working as intended.
“The number of people accessing their pensions via flexible access seems to have levelled out after a sudden rush when the rules changed.”
What is flexible access for pensions?
The ABI also explained that retirement savers seemed to be making sensible decisions about spending their pension cash.
“Not many people have spent their valuable pension savings on that fabled yellow Lamborghini,” said Braun.
“Annuity sales are rising, but more money is still going into income drawdown.”
Braun also explained that pension providers are looking for ways to encourage retirement savers to grow larger pension pots.
Flexible access options for those aged 55 or over include taking retirement cash as a cash lump sum or drawing down part of the fund.
Income drawdown lets savers take regular amounts of money while their fund stays invested.
Cash lump sums – technically called Uncrystallised Funds Pension Lump Sums (UFPLS) – let savers take their their pension as a single lump sum, or to take several lump sums from a pension whenever they choose.
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