Since the new pension freedoms took effect in April, figures show that savers have been taking out £27m a day. According to the Association of British Insurers (ABI) nearly £2.5bn in payments have been made to savers in the three months since the changes were introduced.
The figures from the ABI show that some savers have chosen to receive their payout in lump cash sums, while others have chosen income drawdown payments. Income drawdown leaves the pension pot invested, but savers take an income from the pot. Other savers have chosen to invest in products which will give them a regular income.
What Do Freedoms Provide?
The pension freedoms, introduced on April 6, give people over 55 more freedom with their pension pot. Instead of being required to buy an annuity with their pension pot, savers now have flexibility to take their pots in different ways, such as those described above. Generally 25% of the pension pot is tax-free while the rest of the pot is subject to tax. Since the changes took effect, 45% of customers buying an annuity have changed their provider. More changes to pensions are on the way next April too. Our blog on Annual Allowance alterations can be found here.