Nearly a quarter of a million payments worth £1.8 billion were made to customers from pension pots in April and May, according to new figures published today by the Association of British Insurers.
In the same period, £1.3 billion was put in to buying nearly 22,000 regular income products, with over 50% of this going into income drawdown products rather than annuities. In 2012, when annuity sales were at their peak, over 90% of the total value of sales were annuities. Less than 10% of total sales were income drawdown sales.
This data publication coincides with 100 days since the pension reforms came into force, and shows the choices savers have been making about their retirement.
The new data released by ABI shows that savers have taken out over £1billion in 65,000 cash withdrawals from their pension pots, with the average pot take being £15,500. These case lump sum payments take advantage of new forms of withdrawal called Uncrystallised Fund Pension Lump Sum (UFPLS).
It has also been revealed that savers have taken out £800m worth in payments from income drawdown policies in 170,000 withdrawals, and that
savers have put in £630m to buy 11,300 annuities and a further £720m to buy 10,300 income drawdown policies. This compares to nearly £1.2 billion a month in sales of annuities at the peak in 2012, when only £0.1 billion per month was put into income drawdown products.
The average annuity was purchased with £55,750 and the average fund put into drawdown was £69,900.
The data also shows that many customers are shopping around for the best deal, with nearly half (45% of sales) choosing a different provider when buying an annuity and over half (52% of sales) switching when buying an income drawdown product.
ABI’s Director for Long Terms Savings Policy, Dr Yvonne Braun comments, "This is an important reminder that tens of thousands of people are successfully accessing the pension freedoms as intended and on the whole the industry has risen to the challenge of giving customers what they want.
"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. It also highlights an increase in the number of people putting money into income drawdown products that can take advantage of the new freedoms.
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. This is why we launched our Action Plan to call for a joint taskforce with industry, Government and regulators to work through the challenges and ensure all customers can access their pension in the way they want."