The way people have been accessing pension freedoms is "very worrying", retirement experts have said. Figures from the City regulator show that 120,969 who cashed in a pension fund between July and September last year took the whole lot out. In contrast just 58,021 people used the money to buy themselves an income, said the Financial Conduct Authority (FCA). But some people cashing in their pots may have invested it elsewhere - in property, or an ISA, for example. The majority of these taking out cash - 88% - had savings of under £30,000, which would have bought them a relatively small income.
Of those people taking an income from their funds, 84% were taking a yield of less than 4% - considered to be a prudent amount to prevent running out of money before they die. However, more than 24,000 took an income worth more than 10% of their savings, a level that is considered unsustainable in the long run.
"Many aspects of the freedoms are working very well but there are aspects which give cause for concern," said Angus Willson, retirement specialist at Investment Solutions. He said income withdrawal rates were "mainly at a prudent level", and people had not been put off buying annuities. The FCA figures showed that 13% of people taking money out of their funds bought an annuity between July and September.
Many in the industry had worried that people would be put off buying an annuity - an income for life - as a result of the pension changes introduced in April 2015. However, 64% of annuity-buyers were sticking with their existing provider, rather than shopping around to get the best deal. In this respect, "market competition appears not to be working". The FCA figures also show that relatively few people are using the government's free advice service.
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