The pensions freedoms that started just over a month ago shows no signs of running out of steam as more than a third of people over the age of 55 have indicated that they plan to take money out of their retirement pot in the next year.
Since 6 April pension savers have been able to access their money more easily to spend or invest as they wish, without facing huge charges for doing so.
A poll of 11,000 people by financial firm Hargreaves Lansdown undertaken five weeks into the reforms found that cars and properties were being shunned in favour of more sensible investment decisions.
Almost a quarter of people said they intended to withdraw their pension money in order to reinvest it in an Isa, while almost a third wanted to to use it for general living expenses.
“It appears that investors are gravitating towards more considered choices as time has gone on,” said Tom McPhail, head of pensions research at Hargreaves Lansdown.
Almost 20% intend to spend some of the money on a holiday, while only 7% plan to invest in buy-to-let.
Separate figures from the firm’s clients provide further evidence that annuities are no longer the investment of choice for retirees.
Fewer than one in 10 of those who have acted on the pension freedoms in the last few weeks have opted for an annuity, which provides an income for life in exchange for a lump sum investment.
The majority have instead moved their pension pot into an income drawdown plan to access their cash, while almost 17% have taken advantage of new rules that allow them to use their pension pot like a bank account and withdraw small sums of cash at several stages over time.
“We see evidence that demand for annuities may grow again over time as investors are looking for higher levels of secure income than flexible withdrawals,” McPhail said. “We’re also interested to see that death benefits are now being cited as a reason not to withdraw money from a pension.”
In September 2014 the chancellor, George Osborne, announced that he was abolishing the so called death tax, the 55% charge payable on an inherited pension pot. This has made it much more attractive to keep money in a pension fund.
Separate figures from pensions giant Scottish Widows show that the size of the average pension pot that has been cashed in in the last five weeks is £13,500.
The company has had 55,000 visits to its Retirement Freedoms website, with 6,000 of these people going on to request access to their cash.
“We are also seeing a trend in overseas customers where many are choosing to cash in their pots to pay for property, and instances where people are looking to take a percentage lump sum for a specific purpose such as property repair works,” said Robert Cochran, retirement expert at Scottish Widows.
