Pension Freedom Withdrawals Top £30 Billion

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Pension withdrawals show no sign of flagging even though cash taken from pots dropped slightly in the past year.

The latest official data from HM Revenue & Customs shows retirement savers have withdrawn £30 billion since pension freedoms started in April 2015.

Freedoms allow any pension saver aged 55 or over to take their retirement cash as they wish – and have proved extremely popular.

The latest figures for the third quarter of 2019 reveal £2.4 billion was taken as flexible drawdowns – 5% down on the £2.75 billion taken in Q2 2019 but 21% up on the £2 billion withdrawn a year ago.

The average amount taken by pension savers was £7,250, 12% down on Q2 and lower than last year’s £7,600 Q3 figure.

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Savvy timing to save tax

Pension freedoms were accessed by 327,000 individuals in Q3, 27% up on the 258,000 doing so a year ago, but 3% down from Q2 2019.

Sir Steve Webb, former pensions minister who is now director of policy at financial provider Royal London, said: “Pension freedoms have been hugely popular and allow hundreds of thousands of people every quarter to draw on their pension savings in a flexible way.

“There is also evidence that people are being savvy about the timing of their withdrawals, spreading them over more than one tax year to reduce their overall tax bill.  But it remains the case that we need to increase the proportion of people who take financial advice or guidance before making decisions about how much of their pension to withdraw.”

However, some financial experts warn drawing out pension cash too soon may leave some savers short of funds in later life.

Short of cash

Emma Byron, managing director at Legal & General Retirement Income, said: “Ferraris or Lamborghinis? Britain’s over-55s might not be spending their retirement savings on supercars, but thousands are accessing their pensions without planning.

“This could leave them running short of funds in later life, or even see them become overly modest with the amount they access. Either way, the result is the same: they can’t enjoy the retirement they really want.”

Pension freedoms allow retirement savers to decide how to withdraw or invest their cash without having to lock the money in a lifelong annuity that pays a low rate of interest.

The rules were introduced by then Chancellor George Osborne in April 2015.

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