Cautious observers may have feared the worst when UK investors withdrew over £1.8bn from their pension pots earlier this year, in the wake of a changes to pension laws which came into effect on 6 April
New research by the Association of British Insurers (ABI), however, released 100 days after the new rules were implemented, has suggested that savers are showing a shrewd approach to their newfound freedoms. According to the findings, of nearly a quarter of a million payments made from pension pots in April and May this year, £1.3bn was channelled into purchasing almost 22,000 regular income products. Of this, around half was invested in annuities and half in more flexible income drawdown products.
“What these figures show is that, contrary to recent government and certain press comment, the industry has responded well to the ‘Freedom and Choice’ agenda,” said Simon Laight of Pinsent Masons, the law firm behind Out-Law.com. “Time was short and yet, in general the industry has embraced what are entirely voluntary changes.
“The figures also appear to point to a mature response by savers, with the larger pots being put into regular income products rather than being cashed out. Early days, but perhaps the government was right to trust that people would behave responsibly with their money.”
The ABI’s Dr Yvonne Braun agrees. “Tens of thousands of people are successfully accessing the pension freedoms as intended,” he said, “and on the whole the industry has risen to the challenge of giving customers what they want.”
Under the new pensions regime, members of defined contribution schemes may access their savings once they turn 55, without being given tax penalties or being forced to buy an annuity.