The craze for full cash withdrawals seen in the first year of pension freedoms continued in the second year, figures from the Association of British Insurers have shown.
In the second and third quarters of 2016 a total of £1.627bn was taken in full pension withdrawals.
If that were repeated in the following two quarters, it would bring the total value of full withdrawals to £3.254bn in the second year of pension freedoms.
That would be fractionally less than the first year (starting April 2015), which saw £3.3bn taken out in full cash withdrawals.
However, there were signs full cash withdrawals may be diminishing. In Q2 of 2016, £860m was withdrawn, while in Q3 just £767m was withdrawn.
Average lump sum values also diminished. In the first year of pension freedoms they stood at £15,200.
By Q2 of 2016 they had fallen to £14,300, and in Q3 they were £13,900.
Contradicting to the view that pension freedoms have decimated the annuity market, the ABI's figures showed annuity sales were fairly steady.
In the first year of the new regime, a total of 80,000 annuity policies were sold at a value of £4.2bn.
In Q2 of 2016, £1.18bn was invested in 20,800 annuity policies, while in Q3 £1.17bn invested in 20,100 annuity policies.
Across the two quarters, 170,000 pension pots were accessed for the first time and 82,100 new products being sold.
The average sum being taken by people going into drawdown for the first time was just over £2,000.
Previous figures, covering all customers in drawdown during the first twelve months of the flexibilities, showed average payments over £3,500.
The ABI’s head of retirement policy Rob Yuille said: "It was inevitable that fewer people would choose a guaranteed income for life if they had the option of a lump sum, but after an initial dash for cash the market is settling.
"While the numbers of those taking their pensions as a lump sum remains high, the average pot taken is relatively small with the majority of funds going into either a guaranteed income for life or a flexible income product.
"Flexibility is more meaningful to those who have been able to save more. Auto-enrolment has worked well to get millions more people saving for a pension. The priority now has to be increasing savings levels, and ensuring self-employed and part-time workers don’t get left behind."
Andrew Tully, pensions technical director at Retirement Advantage, said the figures demonstrated retirees continued to value the guaranteed income that came with annuities provide.
"Commentators were quick to write off annuities, but it is still a substantial market, having received a quiet makeover in the background which is obviously proving attractive to customers," he said.
"We still need to tackle the issue of people shopping around, whether that be for an annuity or drawdown. We know the extra value created by shopping around, and yet only half the market switches provider at the point of retirement, so many customers continue to lose out."
james.fernyhough@ft.com
