Four out of five cash lump sums paid out from pension pots have been to people aged under 65, figures show.
Pension rules were relaxed in April to make it easier for savers aged over 55 to access cash from their retirement funds rather than buying an annuity to provide them with an income. But the Association of British Insurers, which represents pensions companies, said that in the first three months of the new regime around 60% of all cash lump sums paid out went to people younger than 60, and around 80% to under-65s.
Over that period £2.5bn was withdrawn from pension funds, meaning under-65s accessed around £2bn.
As part of the changes, rules allowing savers to withdraw funds worth less than £10,000 were extended to people aged below 60.
The ABI said that in 95% of cases, where savers accessed a cash lump sum they withdrew the entire fund.
Yvonne Braun, director of long-term savings policy at the ABI, said: “There has been a lot of activity involving the under 65s, who account for more than four in every five cash lump sum withdrawals, but the majority of people have only been cashing in relatively small pots which account for a tiny proportion of all the money which could have been released.
“This shows that on the whole the British public are taking a sensible approach.”
She added: “Giving individuals greater power over their pension pots should encourage more people to put money aside for their retirement.”
Tom McPhail, head of retirement policy at financial advisers Hargreaves Lansdown, said the figures were in line with his company’s experience. “The average age of cash withdrawals is around 60, but the most common age is 55,” he said.
McPhail said savers were predominantly either withdrawing money to reinvest it in an Isa or to use for day-to-day living expenses.
“Over time I think demand will settle down, but it is entirely possible that a cash withdrawal at age 55 will prove to be a persistent phenomenon,” he said. “The key test will be whether people are making good broad-based decisions with their overall retirement savings.”
Dean Mirfin of advisers Key Retirement said the figures “point to the potential problems to come”.
“With 60% of lump sum withdrawals being made by the under 60s, are these all from insignificant pots for those with greater provision elsewhere, or could we see greater pension shortfall issues for some who are spending ahead of time?” he said.
“The problem is that we don’t know and only time will reveal the full story for the younger age groups who are clearly the current early benefactors of the new reforms.”
