Almost £2.5bn worth of payments have been made to customers in the first three months since the new pension freedoms came in, according to the Association of British Insurers.
The trade body’s figures for April, May and June showed that £2.3bn was used to buy nearly 37,500 regular income products - either annuities or income drawdown products.
The research also revealed, for pay outs:
• £1.3bn has been paid out in cash lump sums, with an average payment size of just under £15,000.
• £1.1bn has been paid out via 264,000 income drawdown payments, an average payment of nearly £4,200.
Meanwhile, for funds being invested into drawdown products and annuities:
• £1.3bn has been invested in 19,600 income drawdown products, with an average fund size of almost £68,000.
• £990m has been invested in around 17,800 annuities, making the average fund invested just over £55,600.
• and 45 per cent of customers buying an annuity changed provider. For income drawdown purchases, this figure was 55 per cent.
The ABI’s director for long-term savings policy, Yvonne Braun, said that the figures demonstrate the popularity of the reforms.
“Many thousands of people have accessed their savings to get extra cash as they approach retirement. Meanwhile annuities, which guarantee an income for life, and income drawdown are proving attractive to those with larger pension pots.”
Adrian Lowcock, head of investing, Axa Wealth: “So far the evidence shows that people are behaving responsibly with the new pension freedoms and fears of reckless spending were unfounded. It’s good to see that, on the whole, it is those retirees with small pots that are taking advantage of the pension freedoms to access their pension money.
“We need to continue to work hard to ensure retirees are fully aware of the impact their decisions can have on their retirement income. Demand for annuities has naturally fallen since the pension freedoms were introduced and low interest rates make them look less attractive.
“However, a secure regular income can be used to pay for the essentials, such as food and heating, so an annuity – or similar product - can still play an important role for investors planning their retirement.”
Yesterday (1 September) research from Yorkshire Building Society showed 7 per cent of over-65s – about 728,000 people - will look at P2P lending despite the lack of Financial Services Compensation Scheme protection and potential issues with ease of access to their cash.
A similar proportion are looking to invest in individual shares where all capital is at risk, while 7 per cent said they were considering putting money into bonds.
Although two-in-five of the 1,020 over-65s polled back in May said they were most likely to leave their money in a pension fund and use it to generate a retirement income, the research showed a quarter do not know how to invest their money.
peter.walker@ft.com
