Greater pension scheme freedoms in the UK have resulted in many people with small pension pots withdrawing their savings.
Nearly 121,000 UK pension savers – or 68% of those studied – cashed out of their defined contribution personal pensions in the third quarter of 2015, sample data from the Financial Conduct Authority (FCA) shows.
Most of these withdrawals – which result from more freedoms about how savers manage their pensions – were of small pension pots: 88% were for pots below £30,000 (€41,000), and the total amount of small pots withdrawn accounted for just over half of all total withdrawals.
The FCA study was based on 95% of defined contribution, contract-based, pension scheme assets. The data is from life and non-life companies that provide personal pensions and occupational pensions.
The FCA also studied partial withdrawals. Nearly three quarters of people making partial withdrawals withdrew less than 2% of their retirement pots, after tax-free cash.
The study also finds that most consumers accessing their pensions – for example, to purchase an annuity – stayed with their existing providers.
Greater pension freedoms in the UK, including greater access to pensions before retirement and the scrapping of the requirement to buy an annuity at retirement, were introduced in 2014.
©2016 funds europe