New figures from the The Association of British Insurers (ABI) suggest around 80% of pension cash lump sum withdrawals were made by people who hadn’t reached the age of 65.
Interest in the reforms resulted in an 80% increase in calls to pension providers in the first month following the so-called ‘pension freedoms’.
In the first three months, providers paid out almost £2.5bn in cash and income drawdown payments.
Around 60% of all cash lump sums paid out in the first three months went to people younger than 60, and around 80% to under 65s. For the same period, only 42% of income drawdown payments went to the under 65s.
The ABI also said that in 95% of cases where savers accessed a cash lump sum, they withdrew the entire fund.
The amount of pension freedom cash withdrawn in the first three months represents less than 1% of all pension funds held by over 55s.
“These figures show that tens of thousands of people have used the new pension freedoms so far to access money they have saved,’ said Yvonne Braun, director of long-term savings policy at the ABI.
“There’s been a lot of activity involving the under 65s, who account for more than four in every five cash lump sum withdrawals, but the majority of people have only been cashing in relatively small pots which account for a tiny proportion of all the money which could have been released. This shows that on the whole the British public are taking a sensible approach.
“The changes which came into effect on April 6th revolutionised the world of retirement savings, now the country needs to ensure as many people as possible can make the most of them. Giving individuals greater power over their pension pots should encourage more people to put money aside for their retirement.
“Another goal must be to use the tax relief system to better incentivise saving, which is why we have proposed a simple Savers’ Bonus for everyone paying into a pension.”