Pension scheme members have withdrawn more than £1 billion from their pension pots since the introduction of the new freedoms in April 2015.
Chancellor George Osborne (pictured) announced that more than 60,000 people have made use of the reforms, which allow members of defined contribution (DC) schemes aged over 55 to withdraw their entire pension as cash, convert it into an annuity or put funds into drawdown.
Osborne said: “We should trust people who have worked hard and saved hard with those savings in retirement.
“These unprecedented pension freedoms have been widely welcomed.
“So far, in the few weeks since they came into effect, 60,000 people have made use of them.
“More than £1 billion has been transferred out of people’s pension funds as a result.
“It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds and that companies up their game in helping customers make use of these freedoms. We will be watching these things very carefully.”
However, according to a number of reports, scheme members have experienced problems accessing their retirement savings in the wake of the pension freedoms.
On 13 June 2015, Iain Duncan Smith, work and pensions secretary, told The Telegraph that the government would name and shame providers who are stopping savers from accessing their pension pots.
Research by retirement services provider Partnership, which had more than 3,400 respondents (interviewed in February and May 2015), found that pension scheme members wanted to withdraw money from their pot to keep cash in a bank account for treats (45%), while others (18%) wanted to spend it on a holiday or something to celebrate retiring. Up to 31% intended to repay debt.
Replacing a car (16%) and household appliances were also priorities (11%) when withdrawing cash from pensions.
Further research from The Defined Contribution Investment Forum’s At-retirement solutions for the new pensions era report, found pension schemes have begun to evolve in terms of the member support they provide and their at-retirement investment design as a result of the pension freedoms.
Andrew Megson, managing director at Partnership, said: “It appears that while people are keen on the idea of more pension freedom, they are still relatively prudent in their approach to spending their pots, and expect others to be as well.”
Tom McPhail, head of pensions research at investment management provider Hargreaves Lansdown, added: “While the number of people taking money from their pensions has not significantly increased, the way they are doing so has, with less than one in ten of people currently choosing to buy an annuity, compared to eight or nine in 10 only a couple of years ago.”