The Chancellor has told the House of Commons 60,000 savers have taken out a total of £1bn since April, when pensions freedom came into effect.
George Osborne announced the figures today showing that investors withdrew a total of £1bn from their pots at an average of about £17,000 each.
The government reformed the retirement income space over the last year to allow all savers over the age of 55 to access their pension savings in any way they wish.
Osborne (pictured) said the unprecedented pension freedoms “have been widely welcomed”, calling the reform “a real success”.
But he added: “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.”
Osborne reiterated the Conservative Party’s belief in “trusting people who have worked hard and saved hard with those savings in retirement”.
But Old Mutual Wealth retirement planning manager Adrian Walker warned against using withdrawal rates as a ‘measure of success’ for pension freedom.
“The UK has a problem with saving, not spending, so care needs to be taken when deciding how to measure the success of the pension freedoms,” he said.
“I would suggest that a more appropriate measure of success will not come for many years, when those people who have withdrawn money from their pensions are still enjoying the retirement they planned and saved many years for.”
Foundations
The announcement comes on the 20th anniversary of the introduction of drawdown under the Conservative government in the mid-1990s. Drawdown was first created by the Finance Act 1995 which received Royal Assent on 1 May 1995.
In response to the figures Hargreaves Lansdown head of pensions research Tom McPhail said: “George Osborne has built on the foundations of his predecessor, first by abolishing the requirement to buy an annuity back in 2011, and now giving investors complete freedom to draw on their pensions.
“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.
“This is a reform of equal magnitude to the Right to Buy council house sales revolution of the 1980s; in the same way that Margaret Thatcher introduced millions of people to home ownership, George Osborne is now introducing millions of people to pension ownership.”
