The Association of British Insurers has warned that some savers are taking out “too much too soon” as it published data from the first year of pension freedoms.

In the last quarter, 4 per cent of pension pots had 10 per cent or more withdrawn and the ABI has warned it could mean some people will see their money run out in a decade or less if they are reliant on their pension pot as their main source of income.

However, the ABI said it cannot identify from the data whether these savers may have multiple pots or other regular income.

Despite this, the data, which accounts for April 2015 to April 2016 revealed that a large majority of savers are taking a sensible approach, with 57 per cent of pots seeing just 1 per cent or less withdrawn from them during the last quarter.

In the most recent quarter, sales for guaranteed income for life (annuity) products have fallen, with £950m invested, compared to £1.1bn last quarter.
Sales of flexible retirement income (drawdown) products remain consistent, with £1.48bn invested, compared to £1.49bn the previous quarter.

Overall, the first year of the pension freedoms saw pay-outs of £4.3bn in 300,000 lump sum payments, with an average payment of £14,500. Of this £3.9bn has been paid out via 1.03m drawdown payments, with an average payment of £3,800.

Since the reforms came in, for funds invested in new products £4.2bn has been invested in 80,000 annuities, with an average fund of £52,500. A further £6.1bn has been invested in 90,700 drawdown products, making the average fund invested nearly £67,500.

In addition, over the last year since the reforms were introduced, 41.5 per cent of savers switched when buying an annuity. Other savers may have looked at different providers and chose to stay with their existing provider who could have offered favourable rates, and new data shows around half of internal annuity sales, ie where a customer did not switch, had a guaranteed annuity rate attached.

For drawdown, 53 per cent chose to go with a different provider at the time they took money from their pension. Others will have transferred their pension before going into drawdown.

Commenting on the analysis, ABI director of policy, long term savings and protection Yvonne Braun said it is the most “detailed analysis” of customer decisions to date: "The data shows that the freedoms have been implemented successfully, and are working as intended.”

On the revelation that some savers are withdrawing too much too soon, she said that there may be “other factors at play” such as people living on other retirement income.

"But this is a warning sign that requires further investigation. We need a full picture of these customers’ circumstances and income, which is something we urge regulators and the government to work with all stakeholders to examine.

"The fall in annuity sales in the most recent quarter reflects ongoing pressure on rates, which will not have been helped by the recent decision to lower interest rates to a 300 year low, and further quantitative easing measures."

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