People of pensionable age in the UK have taken out over £1.8billion from their retirement savings in the last two months. This has been triggered by a change in the law that allows pensioners to spend the savings that they have accrued in any way they choose.
The government announced a number of changes to the way that pensions and savings are regulated earlier on in the year. These included an end to the requirement to purchase an annuity at the point of retirement, plus a raised threshold for savings that are tax-free.
Despite the fact that the government launched an impartial service aimed at helping pensioners to navigate their options, many leading industry figures expressed their concern that this, on its own, would not be sufficient to prevent some people making unwise investment decisions.
The Association of British Insurers (ABI), has noted that those people with smaller pension pots are more like to cash in; conversely those with more significant amounts saved are opting to purchase products that will provide an income for life, as opposed to an annuity.
Almost 250,000 payments were made from pension savings in April and May, according to data published by the ABI.
The body believes that these figures demonstrate that many thousands of customers are successfully taking advantage of the new freedoms afforded by the change to the law.
However, the changes have only been live for three months, so it is quite possible that further issues will emerge over the coming year, which will need to be ironed out – especially in terms of how financial advice is provided. Even so, the ABI is confident that the changes will prove beneficial to those of retirement age in the long term, and points out that the change to the law was part of was the largest overhaul to pension provision for decades.