Providers warn on pension freedoms as withdrawals top £8bn

Pensions-savings-retirement-piggy bank

Some savers may be in danger of running out of retirement savings by withdrawing too much from their pension pots too soon, the Association of British Insurers has warned.

Figures on the first year of pension freedoms show 57 per cent of savers have withdrawn less than 1 per cent in the last quarter.

However 4 per cent of people had withdrawn 10 per cent or more of the cash in their pension.

The ABI says some savers were taking their who pot in one go but it could not tell if those people had multiple pots or other regular income.

ABI long-term savings and protection policy director Yvonne Braun says: “There may well be other factors at play here, such as people having other retirement income, for instance final salary pensions or multiple pots.

“But this is a warning sign that requires further investigation. We need a full picture of these customers’ circumstances and income, which is something we urge regulators and the Government to work with all stakeholders to examine.”

Elsewhere, the data showed more than £8bn had so far been withdrawn since the start of pension freedoms in April 2015.

Lump sum payments resulted in £4.3bn being paid out with the average payment being nearly £14,000.

There were 1.03 million income drawdown payments during the year resulting in £3.9bn being paid out with an average payment of £3,800.

Since the pension freedoms reforms were introduced £4.2bn was invested in 80,000 annuities with an average fund of £52,500 and £6.1bn was invested in 90,700 drawdown products.