Pension Freedom Withdrawals Hit New Record

617

Drawing down money from retirement savings continues to hit new records four years after pension freedom rules were introduced for the over 55s.

Pension freedoms have seen savers withdraw more than £25 billion from their pots since April 2015.

But the latest data from HM Revenue & Customs shows that the demand now is even more than when the freedoms started.

In the first three months of this year, 284,000 savers took £2.06 billion from their pensions as 648,000 withdrawals.

The average saver took out £7,250, while the average withdrawal totalled £3,180.

Booking.com

The figures were slightly up on those published for the final quarter of 2018, when 264,000 savers took out an average £7,200.

Pension responsibility

Tax relief for savers in workplace pension schemes is also up.

HMRC paid £23.8 billion relief on contributions last year, compared with £22.5 billion the year before.

Steven Cameron, pensions director at financial provider Aegon, said: “The longer-term trend showed that savers were withdrawing less cash on average. For example, the average withdrawal in the first year of the freedoms was £8,430, compared to £3,358 across the 2018/19 tax year.

“This is encouraging as with greater flexibility comes greater responsibility and the freedoms have also introduced an increased risk.

“Historically, retirees would receive a fixed income which would last them for the rest of their life, but now many are responsible for investing appropriately and ensuring they do not overspend, risking their pension pot running dry partway through retirement.

Loophole too expensive to fix

“The more people who take advantage of the pension freedoms, the greater is the need for access to professional financial advice.”

Meanwhile, Chancellor of the Exchequer Phillip Hammond has decided a pension tax relief loophole for low earners is too expensive to fix.

Retirement savers earning less than the personal income tax allowance cannot claim the relief if they are in a net pay arrangement.

This means they could miss out on tax relief of up to £720 a year.

The Chancellor did point out that savers who pay no income tax still receive a 20% top-up worth the same amount as the loophole claims – but is not payable to savers in a net pay arrangement.

Download the Free Pension Transfer Guide

Expat Pension Transfers Guide

iExpats.com expert writers have created a simple guide to Expat Pension Transfers just for you.

Find out how you could save tax, increase growth and investment opportunities with this simple, no-nonsense guide that will introduce QROPS, SIPPs and QNUPS options and talk through the pros and cons. Download the free guide by following the link below

Leave a Reply