80% of pension cash withdrawals made by under-65s – ABI

Four out of five cash withdrawals from pensions made in the first six months of the pension freedoms have been made by people under the age of 65, according to new figures from the Association of British Insurers.

But the amount of pension freedom cash withdrawn in the first three months represents less than 1 per cent of all pension funds held by over 55s, according to a KPMG report, Freeing the Future, supported by the ABI.

Around 60 per cent of all cash lump sums paid out in the first three months went to people younger than 60, and around 80 per cent to under 65s, the ABI says.

For the same period, only 42 per cent of income drawdown payments went to the under 65s.

In 95 per cent of cases where savers accessed a cash lump sum, they withdrew the entire fund.

Interest in the reforms resulted in an 80 per cent 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.

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