Analysis of withdrawal trends at one pension provider during the first year of pension freedom show that full withdrawals represented just 1% of all withdrawals and the majority (77%) of full withdrawals were less than £30,000 in value.
The study by Sipp and platform provider AJ Bell says there is little evidence in the first year that pensionholders are pulling out their money to buy Lamborghinis and other luxuries.

The average full withdrawal was just under £25,000, says AJ Bell, and only 12% of people who did not take professional financial advice when making a full withdrawal sought guidance from Pension Wise, the Government service set up at the time pension freedom came into effect.

According to AJ bell, the data shows that most people are using the pension freedom rules “exactly” how they were intended – to provide an ongoing and sustainable income in retirement via partial withdrawals or income drawdown. The average partial withdrawal made by AJ Bell’s customers was just 1.86% of their overall fund value.

AJ Bell has also seen a significant uptake of the more flexible death benefit rules. Since the pension freedoms came into effect, 42% of beneficiaries receiving pension death benefits from AJ Bell’s pensions have elected to keep the inherited funds in a pension and use the new flexible income drawdown rules.

Billy Mackay, marketing director at AJ Bell, said: “The stampede for the exit door to fund frivolous purchases following pension freedoms has not materialised.

“The sports car driving pensioner was a nice image but the reality of tax charges on large withdrawals has kept people’s feet on the ground. Our experience has been that people are using the new flexibility to produce a steady, tax efficient income stream in the form of partial withdrawals where they don’t want their hands tied by an annuity.

“It is also apparent that people are utilising the new death benefit rules to keep inherited pensions in drawdown which enables them to pass any residual funds down through the generations upon second and subsequent deaths.”

AJ Bell has assets under administration of over £26.1 billion and more than 120,500 clients. It also provides third party Sipp administration services for Barclays Stockbrokers, Halifax Share Dealing, Old Mutual Wealth and TD Direct.