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Association of British Insurers (ABI) today revealed most people taking lump sums out of their pension pots have actually been pretty sensible so far.

Are you being sensible with your newfound (pension) freedom?

When the new pension freedoms kicked in a year ago, there were fears hard-earned retirement savings could be squandered on sports cars and fancy holidays.

But the Association of British Insurers (ABI) today revealed most people taking lump sums out of their pension pots have actually been pretty sensible so far.

A total of 300,000 lump sum payments have been taken with an average payment of £14,500.

Data from the first full year shows about 57% of pension pots had less than 1% taken out.

But 10% or more was taken out of a total of 3,379 pensions, and the ABI reckons this could mean those retirement incomes run out within a decade. Some withdrew their entire pension pot in one go.

However, this does include people who might have investments elsewhere, other sources of income and multiple pension pots.

It also seems people with multiple pension pots are treating them differently.

While larger pensions are being used as a regular retirement income, it is the smaller pots being raided for lump sums.

Jackie Spencer, Pensions Expert for the Money Advice Service, said: “We are really pleased to see that the majority of people are taking time to make a decision about their pension options rather than withdrawing their money straight away, however it is worrying that a small number are withdrawing too much too soon.

“It is important to make sure that you consider the full length of retirement when making a decision about your pension money. Make sure you research all of the options available to you and consider the tax implications of taking out lump sums so you don’t run out of money in retirement.”

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