More than 770,000 over-55s have taken money out of their pension pots following the new freedoms introduced by George Osborne, according to HMRC figures.
The announcement prompted concern that many will run out of cash before they die, after estimates that people taking advantage of flexible access to their pension had taken out an average of more than £11,000 each.
Between April and June this year, 159,000 people withdrew £1.8bn from their pensions, bringing the total to £6.1bn and marking a rapid acceleration from the early days of the reforms.
Osborne, who has been replaced as chancellor by Philip Hammond, sparked a pensions revolution after scrapping rules 15 months ago that forced many people to buy controversial annuities, or an income for life. Instead, over-55s were given the freedom to do what they like with the money in their pension schemes.
The government also said there had been 2.7m visits to Pension Wise, the free and impartial guidance service, and nearly 75,000 appointments to date.
The economic secretary to the Treasury, Simon Kirby, said: “It’s only right that people should have a choice over what they do with their money, and today’s figures show that pension freedoms continue to be a popular choice.
“Our pension reforms have already given hundreds of thousands of people access and responsibility over their hard-earned savings and we will continue to make sure that the pension freedoms work well for everyone.”
Pension providers warned, however, that the reforms could leave some elderly people in poverty later in life. Adrian Walker of Old Mutual Wealth said: “Pension freedom reforms have liberated the retirement market, but it is dangerous to measure the success purely against the amount of money people are taking out.
“The figures show that in [the second quarter of] this year, on average more than £11,000 was taken out by individuals accessing their pensions flexibly. That suggests that some people are at risking of winding-down their savings too quickly.”
For many, the scrapping of annuity rules could not have come early enough. Since Brexit, the rates of income paid on annuities have fallen to record lows.
The income on offer from the typical annuity fell by 6.3% in the month following the outcome of the EU referendum. “As a result, annuity rates are now at record lows and have declined by as much as 12% since the start of the year,” said the data firm Moneyfacts.
The UK annuity market, worth £12bn in 2014, has shrivelled to less than half that size since then, and with interest rates expected to fall again next week is likely to become a minority choice among retiring pensioners.
Tom McPhail, a pensions expert at Hargreaves Lansdown, said too many pensioners were drawing money from their pension pots at their existing provider rather than shopping around for better deals.
“We’re concerned about the ongoing failure of shopping around. Many of these investors are using their existing pension provider simply because it is the most available solution; if they don’t shop around they may miss out on better deals and services which are available elsewhere.”
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