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Pension freedom has resulted in few Lamborghinis and mostly common sense

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The Association of British Insurers (ABI) has published data which reveals that GBP4.7 billion has been withdrawn under the new pension freedoms since April this year. 

The ABI finds that, overall, people are taking a common sense approach when making decisions for their retirement. The data shows that smaller pots are generally being taken as cash, while larger pots are still being used to access retirement income, with GBP5 billion invested to buy nearly 84,500 regular income products, either annuities or income drawdown products.
 
And annuities are not left out in the cold as many feared. Annuity sales have seen their first quarter on quarter increase for the last three years, with 22,380 sold, worth GBP1.17 billion in the third quarter of this year compared to 18,200, worth GBP990 million last quarter. The last time there was a quarter on quarter increase was Q2-Q3 2012, according to the ABI.
 
For pay outs, the figures show that GBP2.5 billion has been paid out in 166,700 cash lump sum payments, with an average payment of just under GBP15,000. GBP2.2 billion has been paid out via 606,000 income drawdown payments, with an average payment of GBP3,600.
 
For funds being invested, GBP2.85 billion has been invested in 43,800 income drawdown products, an average fund of almost GBP65,000. GBP2.17 billion has been invested in around 40,600 annuities, making the average fund invested nearly GBP53,300.
 
The ABI data also shows that people are shopping around to find the best deal with 60 per cent of people changing provider when buying an income drawdown policy. This compares to 40 per cent of customers who bought an annuity, where customers are often offered guaranteed annuity rates by their existing provider.
 
The ABI’s Director for Long Terms Savings Policy, Dr Yvonne Braun, says: "The peaceful pension revolution continues. While providers continue to meet high levels of demand, it’s clear that people are taking a sensible approach and considering how they will pay for their retirement.
 
“Despite some ringing the death knell for annuities, this seems to have been premature. An increasing number of people are recognising the value of a guaranteed income, with annuity sales rising this quarter. There are also initial signs that the number of people accessing their pension pot as cash is beginning to settle down, with larger pots continuing to be used to buy retirement income products.
 
“However, the figures also show that ensuring people save enough for retirement remains our key challenge. With life expectancy increasing and final salary pension provision declining, we must now turn our attention to helping customers grow bigger pots.”
 
Commenting on the figures, Adrian Walker, retirement planning manager at Old Mutual Wealth, (pictured) says: “The ABI numbers released today seem to show that the UK public are getting to grips with the new rules and are accessing their pension funds, in the main, responsibly. We are still in the early days but I think what we are beginning to see is the cumulative effect of providers, regulators and the government speaking to pension customers about these changes since they were announced. The new ways of taking your money out are well on the way to becoming the ‘new normal’ and what we need now is a period of real stability from the Government to truly establish the new rules without tinkering around the edges.”

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