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UK pensioners resist temptation to exploit pension freedoms, says Standard Life

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Only 6 per cent of Standard Life’s customers eligible to make use of the new pension freedoms introduced on 6 April have done so, with 94 per cent choosing not to touch their pension pots and stay invested.

Two-thirds (66 per cent) of people entering a drawdown arrangement with Standard Life since 6 April have taken their 25 per cent tax free cash and have left the rest invested – rather than taking an income straight away.
 
The average pot size of those entering drawdown between April and August was GBP132,344.
 
In the five months from 6 April, Standard Life retirement experts have responded to over 146,000 calls from customers. Some 6,657 customers settled their benefits themselves using Standard Life’s online support facility, which gives a comprehensive explanation of all retirement options, as well as relevant risk warnings.
  
Customers who have withdrawn some or all of their cash are spending their money on a wide range of things. The most frequent choices to date include, in no particular order:
 
• Home improvements
• Repaying a debt or mortgage
• Having an emergency fund in the bank
• Paying for a special occasion like a holiday or wedding
• Getting children on the property ladder
 
Jamie Jenkins (pictured), Standard Life Head of Pensions Strategy, says: “The overwhelming majority of our customers have chosen to remain invested, debunking initial predictions that those at retirement would cash in their pots hastily and incur a significant tax charge, leaving them penniless at retirement. What we’re seeing in fact is calm, considered decision-making from customers.
 
“Choosing drawdown doesn’t mean the same thing today as it did two years ago – it’s an umbrella term covering many valid retirement strategies. Previously, for example, people with small pots might have bought an annuity, not because they needed the income, but because they wanted to access their tax free cash and an annuity was the only way to do so. Now they have the right to access their tax free cash while staying invested in appropriate funds, minimising tax and securing wealth transfer to future generations. We expect this new drawdown market to continue to grow as it supports all of the new freedoms.”

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