The government’s pension freedoms were less popular last quarter as withdrawals fell
Retirees have taken £7.6bn from their savings since reforms were introduced in April 2015, the Treasury revealed today – but the pace of withdrawals is falling.
The amount withdrawn during the third quarter of 2016 dipped to £1.5bn, down from £1.8bn in the previous three months.
One of George Osborne's flagship pension reforms announced just over 18 months ago was to allow a tax-free lump sum to be withdrawn of up to 25 per cent of savings. At the time, there were fears pensioners would go on a spending spree, leaving them with insufficient cash to fund the rest of their retirement.
Read more: Pension reform fraud worse than previously thought
However, the latest statistics indicate the amount being taken out per person is steadily falling.
Economic secretary to the Treasury, Simon Kirby said:
Today’s figures prove that allowing people to do what they with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do.
The freedoms remain a popular choice as people consider the different ways to fund their retirement.
Read more: Have we been tempted to raid our pension pots?
Tom Selby, a senior analyst at AJ Bell explained that the reduction in the individual pay-outs was positive. He said: "The initial dash for cash has tailed off and people are becoming more realistic about a sensible withdrawal level over time."
However there remains a concern among some experts around the proportion of savings that people are withdrawing in one-fell-swoop. Old Mutual's head of retirement planning Adrian Walker said:
While this is only a high-level overview, it implies the average withdrawal is a large sum in excess of £10,000. This suggests some people may be at risk of exhausting their pension savings too quickly which will have a longer term detrimental impact on future retirement income.