16th June 2015
Around 60,000 people have made use of new rules to release £1bn from their pensions, the Chancellor has told MPs.
In April, the Government brought in unprecedented new freedoms for retirees, which in principle give them the flexibility to spend their pension pots as they choose.
However, some pension companies have not updated their products to allow retirees to take advantage of the new rules.
Adrian Walker, retirement planning manager at Old Mutual, says: “The Chancellor has suggested that more than £1bn withdrawn from pension funds since the April reforms constitutes a success. 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. I would suggest that a more appropriate measure of success will not come for many years, when those people who have withdrawn money from their pensions are still enjoying the retirement they planned and saved many years for. ”
Tom McPhail, head of pensions research at Hargreaves Lansdown, says: “This announcement comes on the 20th anniversary of drawdown’s introduction under the Conservative government of the mid 1990s. 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. Whilst 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 8 or 9 in ten 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.”