Pensions: FCA says rush to cash in pots of savings is fading
The rush to cash in pension savings - a year on from the introduction of revolutionary rules - has been fading, the regulator says.
Since 6 April last year, savers have been able to release the cash from their pension pot from the age of 55, subject to tax.
In the first three months, 222,000 pension pots were accessed to take some or all of the money.
The latest data shows the quarterly total has fallen to 127,094.
The Financial Conduct Authority (FCA), the City watchdog, said there had been a gradual decline in interest from savers withdrawing some or all of the money.
The latest figures, relating to the final three months of 2015, also suggest a fall in the proportion of savers emptying their pension pot entirely by taking the cash. This stood at 52% of those making use of the reforms compared with 58% in the previous quarter.
This suggests that an initial rush of savers emptying small pension pots - perhaps built up during short-term employment - to use for holidays or home improvements, or to save elsewhere, has ended.
'Not quite a Lamborghini'
When the new access rules were announced, the pensions minister at the time, Steve Webb, said retirees were free to spend their money as they wished - even if it was to buy a Lamborghini.
Ken Rodham, from Washington, Tyne and Wear, saw the opportunity to buy the vehicle of his dreams - not a sports car, but a Bedford OS breakdown truck.
The 71-year-old retired bus driver plans to restore the classic vehicle and take it to rallies in the UK.
"I have always been involved in Bedford vehicles and this opportunity came up," he said.
He dipped into his tax-free lump sum from his pension to buy the vehicle, and admits he might have to dip in again to pay for an extension to his garage, so he can fit it in.
His wife Jill is quite happy with the use of savings.
"She thinks it keeps me out of mischief," Mr Rodham said.
Where's the cash gone?
The state pension system is changing on Wednesday, but separately Chancellor George Osborne has allowed people to access their private and workplace pensions from the age of 55 since April 2015.
Previously, retirees could take 25% of their pot in a tax-free lump-sum. Since last April, the remainder can also be accessed and is subject to the normal rates of income tax, instead of a 55% charge.
While the previous pensions minister suggested that some people might choose to spend the money on sports cars, the reality has been much more mundane.
Data from investment management firm Fidelity International, released to the BBC News website, suggests that its clients have been most likely to call about the tax-free element from their pension pot, and how to use this primarily for day-to-day spending.
Among all of those taking some tax-free cash from their pension, nearly a fifth (18.5%) topped up their income, with 17% reinvesting the money in other products, 12% using it for home improvements, and 12% putting the money towards buying property, either for themselves or to rent out.
|Tax-free cash - how it is spent|
|Topping up income||18.5%|
|Paying unsecured debts||9%|
|Buying own property||7%|
|Purchasing buy-to-let property||5%|
|Source: Fidelity International|
The FCA estimated that about a fifth of those accessing their pension pot took guidance from the government-backed Pension Wise service, which is free.
But a survey by the Institute and Faculty of Actuaries suggested that nearly a third of those asked did not know the difference between this free guidance and financial advice, which is offered by regulated advisers for a fee.