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6 stats for 6 months The ABI on the first 6 months of the pension freedoms

Four out of five cash lump sums paid out to under 65s new figures reveal

The Association of British Insurers (ABI) is setting out 6 top facts to mark 6 months this week since the biggest changes to private pensions for a generation. These include new figures which suggest around 80% of cash lump sum withdrawals were made by people who hadn’t reached the age of 65.

On April 6th, the Freedom and Choice reforms gave many individuals unprecedented access to the pension funds they had been building up during their working lives, including the right to take out cash lump sums.

  • Interest in the reforms resulted in an 80% increase in calls to pension providers in the first month.
  • In the first 3 months, providers paid out almost £2.5bn in cash and income drawdown payments.
  • Around 60% of all cash lump sums paid out in the first three months went to people younger than 60, and around 80% to under 65s1*
  • For the same period, only 42% of income drawdown payments went to the under 65s.
  • In 95% of cases where savers accessed a cash lump sum, they withdrew the entire fund.
  • The amount of pension freedom cash withdrawn in the first three months represents less than 1% of all pension funds held by over 55s**.

Yvonne Braun, Director of Long-Term Savings Policy at the ABI, said:

"These figures show that tens of thousands of people have used the new pension freedoms so far to access money they have saved. There’s been a lot of activity involving the under 65s, who account for more than 4 in every 5 cash lump sum withdrawals, but the majority of people have only been cashing in relatively small pots which account for a tiny proportion of all the money which could have been released. This shows that on the whole the British public are taking a sensible approach.

"The changes which came into effect on April 6th revolutionised the world of retirement savings, now the country needs to ensure as many people as possible can make the most of them. Giving individuals greater power over their pension pots should encourage more people to put money aside for their retirement. Another goal must be to use the tax relief system to better incentivise saving, which is why we have proposed a simple Savers’ Bonus for everyone paying into a pension."

ENDS

On Saturday, the ABI announced its proposals to introduce a ‘Savers’ Bonus’, a Government top up for everyone paying into a pension with the aim of simplifying pension tax relief and further incentivising saving.

*Some of this may reflect pent up demand. It was possible to cash in pots of less than £10,000 before April, but only for those aged 60 or over.

**This analysis comes from the KPMG report, Freeing the Future?, which was supported by the ABI.


Last updated 01/07/2016