Pension freedoms are popular. The right of people aged 55 and over to withdraw their retirement savings and do whatever they wish with them was introduced 100 days ago. Figures published this week reveal that around 235,000 people took out more than £1.8bn from their pension pots in the first two months of the new freedoms.
But there have also been fresh warnings that scammers are trying to trick people into using liberated cash to invest in dodgy schemes that let the crooks steal their money.
The Association of British Insurers (ABI) said that in April and May savers took out more than £1bn in 65,000 cash withdrawals from pension pots, with the average amount being £15,500. Meanwhile around £800m was taken out by savers in 170,000 withdrawals using income drawdown – where someone leaves their pension pot invested but takes an income directly from it.
Some people are still buying an annuity – which provides an income for life – with their retirement savings. However, the amount of money put into annuities has slumped as many people choose to move into income drawdown to take advantage of the new pension freedoms. The ABI reported that savers put £630m into annuities and £720m into income drawdown policies in April and May. That shows a dramatic change from 2012, when nearly £1.2bn worth of annuity sales took place each month and £100m a month went into income drawdown.
The ABI's director for long-term savings policy, Yvonne Braun, said: "The data shows that people with smaller pots tend to be cashing them out, while those with larger pots tend to be buying a regular income product."
Meanwhile, if you've been offered a free pension review, be wary. Check the credentials of the company or person who has made the offer to make sure they're genuine. If someone offers you a "great" opportunity, it's almost certainly a scam of some kind.
One of the most common scams since the pension freedoms were announced has been overseas investment opportunities. The smooth-talking sales people flogging the deals can sound very convincing, but the pension company Aegon says eight out of 10 requests for overseas pension transfers that have been brought to its attention are scams to defraud savers.
"Fraudsters are not only plausible but are also highly persuasive, and it can be all too easy to fall for their polished performance unless you are on your guard," warned Kate Smith of Aegon UK.
"We're seeing more and more sophisticated ways of unscrupulous people getting their hands on people's retirement savings."
The ABI's figures suggest that people with smaller pots, around £17,000, are the most likely to be choosing to cash in. And it's those people who are in the fraudsters' sights. Experts say you should report any suspicions to the Financial Conduct Authority at fca.org.uk, or Action Fraud by calling 0300 123 2040 or going to actionfraud.police.uk.Reuse content