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ABI: £1.8bn withdrawn since pension freedoms launch

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Savers have withdrawn £1.8bn in the first two months of the pension freedoms, according to figures from the Association of British Insurers.

In April and May, savers took out £1bn in 65,000 cash withdrawals from pension pots. The average pot taken was £15,500.

There have also been 170,000 withdrawals from income drawdown policies, worth £800m.

Savers have bought 11,300 annuity policies, worth £630m. And 10,300 income drawdown plans have been purchased, worth £720m.

This compares to £1.2bn a month in annuity sales at their peak in 2012, when £100m per month was put into income drawdown products.

The average annuity was purchased with £55,750 in April and May, and the average fund put into drawdown was £69,900.

Since the pension freedoms were introduced, 45 per cent of those buying an annuity shopped around and chose a different provider. Some 52 per cent of those buying an income drawdown product went with a different provider.

ABI director for long-term savings policy Yvonne Braun says: “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.”



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. I struggle to believe that in 2012 only £100,000 a month was going into drawdown – surely this is meant to be £100 million?

  2. Julian Stevens 15th July 2015 at 9:30 am

    It would be interesting to know how many of these cash-ins were done with the involvement of an IFA and what that involvement entailed. I imagine that very few IFA’s will have just signed a form confirming that the policyholder had been given advice unless s/he really had and, in the great majority of cases, I imagine that the advice would have been not only not to encash but instead to put more in and build on the retirement fund instead of surrendering it and incurring an emergency rate tax deduction from 75% of it. How many policies were surrendered contrary to advice not to do so? How many policies containing GAR’s were surrendered? A headline figure of £1.8 Bn with no supporting information isn’t actually of much value.

  3. So how many vacancies can B&Q and the Big Issue handle in about 10 years’ time?

    I suspect that most of the solvent retirees will be the providers and advisers who have made a few bob out of these ‘Freedoms’.

    I’m all for a dab of austerity to help resolve the deficit, but encouraging people to rob their own future in order to accelerate the tax take now seems a very unpleasant and underhand way of achieving this.

  4. Personally I have not had one of my clients even contemplate taking their pension fund in full, so I do wonder how many or what percentage of this 1.8 billion has been “adivsed” my understanding is it only DB/and ones with guarantees schemes that need IFA sign off !

    Saying that I have had 1 phone call (not an existing client) asking would I sign off to say he had taken advise……. needless to say the answer was NO !!

  5. Most of these pots were fairly small averaging about £15,500. The annuity would be so small it would be hardly worth it and taking the lot was probably the best idea especially as any tax on it is likely to be no more than the basic rate. I expect it paid off debts as in reality many people just spend and run into debt with nothing left at retirement. They are never likely to be advised by an IFA and alternative ‘advice’ if any has been virtually wiped out. That’s what our taxes are for and then there are always food banks and charity.

  6. Julian Stevens 15th July 2015 at 2:55 pm

    The best advice to most people with small policy values should (or at least from me is likely to) be not only not to encash them buy to ADD to them, so that in 5 or 10 years time they may actually have become big enough to make a difference to their retirement income.

    As for anyone asking for me to sign a form confirming they’ve received advice, I would impose three conditions:-

    1. They actually allow me to provide it.

    2. They pay me a realistic fee for so doing and

    3. I send directly to their provider a summary of my advice as opposed merely to signing some bog-standard form that doesn’t actually say anything but which means that it’ll be my nuts on the block if the policyholder goes against my advice and realises a few years down the line that he’s done the wrong thing.

    Clearly, the public have no conception of what protection really means, namely that somebody else always has to pay for it.

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