Chancellor’s warning to providers as he confirms £1bn withdrawn

The Chancellor has confirmed that 60,000 have made use of the pension freedoms in the first weeks of the new regime, withdrawing £1bn from their pots.

Chancellor George Osborne told MPs in the House of Commons today that the figures – which work out at an average withdrawal of around £17,000 per person – show the policy has been greeted as a success by the public.

But he warned that providers need to ‘up their game’ in helping customers to make use of the freedoms, adding that the Government is watching how the retirement market develops.

Osborne said: “I can give the House the latest numbers — indeed, the first numbers — on how many people have taken advantage of the freedoms.

“So far, in the few weeks since they came into effect, 60,000 people have made use of them.

“More than £1bn has been transferred out of people’s pension funds as a result. It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds and that companies up their game in helping customers make use of these freedoms. We will be watching these things very carefully.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “This announcement comes on the 20th anniversary of drawdown’s introduction under the Conservative government of the mid 1990s. “This is a reform of equal magnitude to the Right to Buy council house sales revolution of the 1980s; in the same way that Margaret Thatcher introduced millions of people to home ownership, George Osborne is now introducing millions of people to pension ownership.”

Old Mutual Wealth retirement planning manager, Adrian Walker says: “The Chancellor has suggested that more than £1bn withdrawn from pension funds since the April reforms constitutes a success. The UK has a problem with saving, not spending, so care needs to be taken when deciding how to measure the success of the pension freedoms.  I would suggest that a more appropriate measure of success will not come for many years, when those people who have withdrawn money from their pensions are still enjoying the retirement they planned and saved many years for. ”