New pension freedoms have allowed 60,000 people to access their savings early, as chancellor tells providers to up their game

More than £1bn has been transferred out of pension funds over the last two months as a result of the government’s new freedoms, George Osborne has told the House of Commons.

In the face of growing criticism that the policy had failed to live up to expectations, the chancellor told MPs that so far 60,000 people have made use of the pension freedoms that came into force.

They are the first official figures released since 6 April, what has come to be known as Pension Freedoms Day. On that day, those aged 55 and over were given access to their pension savings for the first time without incurring huge charges.

However, some of Britain’s biggest pension companies have been criticised in recent days for refusing to let retirees withdraw cash from their retirement pots, leading some observers in the media to brand the policy a fiasco. It’s been claimed the policy was rushed into the market in time for the election, and that the pensions industry was not given sufficient time to prepare.

Against that background, George Osborne on Tuesday declared that the freedoms were a success.

“So far, in the few weeks since they came into effect, 60,000 people have made use of them. More than £1bn has been transferred out of people’s pension funds as a result. It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds, and that companies up their game in helping customers make use of these freedoms. We will be watching these things very carefully,” he told the Commons.

Last week, the Association of British Insurers (ABI) responded to concerns that pension providers were making it hard for people to access their cash. Yvonne Braun, the ABI’s director of long-term savings policy, said insurers are committed to making the pension reforms a success.

Osborne’s figures suggest the early adopters may be cashing in relatively small pension funds, with the average pot around £16,600 in size.

The secretary of state for work and pensions, Iain Duncan Smith, has warned providers not to drag their feet, and said new pensions minister Baroness Altmann would be meeting some of them in the coming weeks.

Tom McPhail, head of pensions research at financial advisers Hargreaves Lansdown, said the magnitude of the change should not be underestimated.

“While the number of people taking money from their pensions has not significantly increased, the way they are doing so has, with less than one in 10 people currently choosing to buy an annuity, compared to eight or nine in 10 only a couple of years ago.

“This is a reform of equal magnitude to the Right to Buy council house sales revolution of the 1980s; in the same way that Margaret Thatcher introduced millions of people to home ownership, George Osborne is now introducing millions of people to pension ownership.”