Pension withdrawal data concerns some experts

There was concern in the City on Thursday over the way Britons were accessing their pensions, after fresh data from the Financial Conduct Authority was released.

The data showed that between July and September, 178,990 pensions were accessed. Of those, 34% were using uncrystallised funds pension lump sums (UFPLS) and 30% used income drawdowns - both partial and full withdrawals.

Of those two options, most (seven in ten) were drawing less than 2% of their fund, while a tenth were taking more than 10% of their fund out.

However, only 13% - or 23,385 - purchased an annuity, and 23% - or 40,401 - were full withdrawals using small pot lump sum payments.

"Many aspects of the pension freedoms are working very well, but there are aspects which give us cause for concern", said Hargreaves Lansdown head of retirement policy Tom McPhail.

He said income withdrawal rates were mainly at a prudent level, suggesting that investors were not being reckless and running fown their savings, and it was encouraging to see annuities were still being purchased and the full encashments were primarily the very small pension pots.

"However, market competition does not appear to be working, with fewer annuity purchasers shopping around", McPhail said.

"We are also concerned about the forthcoming pension tax review. The numbers of people accessing their pensions has increased substantially", he added.

McPhail warned that, if the government were to scrap the upfront tax relief in favour of tax-free withdrawals, it could remove what brakes remain on the pension vehicle and cause Britain's retirement savings system to "run out of control".