Pensioners take out more than £1.8bn

PENSION savers withdrew more than £1.8 billion in the first two months of the new retirement freedoms, according to new figures.

The data, released to mark 100 days since the reforms came into force, shows that during April and May, savers took out more than £1 billion in 65,000 cash withdrawals from pension pots.

Some £800 million of payments were also taken out by savers from income drawdown policies, in 170,000 withdrawals, according to the Association of British Insurers (ABI).

Income drawdown is where someone leaves their pension pot invested but takes an income directly from it. Meanwhile, pension savers put in £630m to buy 11,300 retirement annuities and a further £720m to buy 10,300 income drawdown policies.

The ABI said the average annuity was purchased with £55,750 and the typical fund put into drawdown was £69,900.

The ABI said this marks a changing trend from 2012, when nearly £1.2 bn annuity sales took place a month and £100m a month was put into income drawdown products.

When someone buys an annuity, they use the money in their pension pot to buy a regular income. But annuities have been controversial in recent years due to disappointing rates and people not shopping around to get the best deal.

The pension freedoms, introduced on April 6, mean that instead of being required to buy an annuity with their defined contribution (DC) pension pot, people aged 55 and over can take their pots how they wish. Generally, 25 per cent of the pot is tax-free and the remainder is subject to tax.

The ABI’s director for longterm savings policy, Yvonne Braun, said: “This is an important reminder that tens of thousands of people are successfully accessing the pension f reedoms as intended and on the whole the industry has risen to the challenge of giving customers what they want.”