There has been a gradual decline in the numbers of people releasing cash from their pension pots early, a year after rule changes allowed them to do so, according to a report published by the Financial Conduct Authority (FCA).
Since 6 April last year, savers have been able to release cash from their pension pot, subject to the normal rates of income tax, from the age of 55 (whereas previously retirees could take 25% of their pot in a tax-free lump-sum but would have to pay a 55% charge on the remainder).
Critics of the changes feared that they would lead to irresponsible spending, leaving people vulnerable in their old age – but the FCA’s figures suggest that the reality has been more mundane, and that, after an initial rush, interest in withdrawing cash lump sums has waned.
In the first three months after the April 2015 changes, some 222,000 pension pots were accessed to withdraw some or all of the money as cash, but the latest data revealed that the quarterly total had fallen to 127,094.
It has been suggested that this shows that an initial rush of savers emptying small pension pots, perhaps to save in other vehicles or to use for holidays, has ended.
Meanwhile, data given to the BBC by investment management firm Fidelity International suggested that retirees who call with questions have been most likely to ask about the tax-free element of their pension pot, and how to use this primarily for day-to-day spending.
According to the BBC, among those taking tax-free cash from their pension, the most popular use (18.5%) was topping up income, followed by reinvesting in other savings vehicles (17%). Only 5% used the money to invest in buy-to-let property, and 1% used it to fund a wedding.