Dash for retirement cash slows, says provider

A “dash for cash” that began after new pension freedoms took effect in April has now fallen significantly, a leading pension products provider has reported.

Scottish Widows said on 1 June that after an initial surge at the beginning of April until the middle of May – including a call every ten seconds in the week beginning 6 April – the number of full pension encashment requests had fallen by 72 per cent.

In the second half of May, full pension encashment requests accounted for 50 per cent of customer intentions compared to more than 70 per cent in the first few weeks of pension freedoms.

The average size of pot being cashed in full was less than £20,000 with 85 per cent of requests for pots less than £30,000.

Scottish Widows said that while full encashment requests had fallen, customer demand remained high, with an increasing proportion of customers wanting to have detailed conversations about their pension freedoms options, including drawdown and partial pension encashment.

The pension freedoms that took effect in April mean that people retiring with defined contribution pension pots now much greater flexibility in the way they access their money, including taking all the money as a lump sum, leaving it invested and drawing an income from it, taking lump sums over time or buying an annuity.

Robert Cochran, a retirement expert at Scottish Widows, said it was still too early to drawn “definitive conclusions” about the longer-term impact of the pension freedoms.

Richard Jones, retirement director at Scottish Widows, urged retirees not to act in haste, adding: said: “People should not rush in and make a 30-minute decision on what to do with 30 years’ worth of savings.”

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