Pension freedoms: Savers withdraw £1.8bn in three months-By Katie Morley

New pension data from the Association of British Insurers has dwarfed Treasury estimates, leading them to admit their figures may not show the full picture

From April, you will have a lot of flexibility about how you get your pension pot. You can take 25pc of it as a tax-free lump sum, and the rest as and when you want it  Photo: Alamy

Over 55s have taken a total of £1.8bn from their retirement funds since the Government's new pension freedoms were introduced on April 6, according to figures published today.

The Association of British Insurers, the trade body which represents most major UK pension firms, found its members' customers have have taken £1bn from their pensions by cashing in policies, as well as £800m through new flexible arrangements.

The numbers exceed the Treasury's latest pension freedom estimates by half a billion pounds.

In its Budget last week the Government revised up its estimates on pension freedom cash-ins, stating that 85,000 savers had withdrawn £1.3bn from pensions since April. Last month it had the figure at 60,000 savers having withdrawn £1bn since April 6.

But last night the Treasury admitted money could be missing from official figures because pension firms are able to opt out of giving the Government information about how people are drawing their pensions. Reporting these details to HMRC will only be made compulsory in 2016.

Research by Hargreaves Lansdown, a pension firm, estimates that the Treasury’s tax take is likely to be nearer to £700m higher this year as a result of people cashing in their pensions - more than twice the amount it had previously anticipated.
The ABI has also found that for the first time, retirees in Britain are investing more money in flexible pensions than they are spending on annuities.
The pension freedoms were designed to prevent savers being forced into buying annuities, which provide a guaranteed income for life but often provide poor value for customers.
In the three months since the Government's new pension freedoms were introduced, savers have funneled £720m into flexible arrangements compared to £630m which was spent on annuities.
The average annuity was purchased with £55,750, while the average fund invested in a flexible pension was £69,900. The overall number of people buying annuities is still marginally higher than the number investing in flexible arrangements.
Annuity sales peaked in 2012 when savers invested over £14bn, compared to just £1.2bn of savers' money which was invested in flexible arrangements - called "drawdown" pensions - over the period.
The ABI’s director for long term savings policy, Dr Yvonne Braun, said: "This is an important reminder that tens of thousands of people are successfully accessing the pension freedoms as intended and on the whole the industry has risen to the challenge of giving customers what they want.
“The data shows people with smaller pots tend to be cashing them out while those with larger pots tend to be buying a regular income product. It also highlights an increase in the number of people putting money into income drawdown products that can take advantage of the new freedoms.
“We are just three months into the biggest overhaul in pensions for a generation which was introduced in only one year, so some issues remain that need to be worked through, in particular around financial advice."

Culled from The Telegraph