The second quarter of 2018 saw £2.27bn flexibility withdrawn through pension freedoms by 264,000 individuals, the most since the introduction of freedoms in 2015, HMRC has revealed.
In its latest update on the flexible payment statistics, the number of payments increased from 500,000 in Q1 2018 to 574,000 in Q2 2018, up from the 381,000 payments made in Q1 2017.
The latest round of figures means that approximately £19.72bn has been withdrawn by 1.26 million people since the introduction of freedoms, spread across a total of 4.27 million payments.
Retirement Advantage pensions technical director, Andrew Tully, said: “A new norm has emerged for people to take cash, often with smaller pots being withdrawn fully. Many people are also making multiple withdrawals in a tax year, which suggests they are treating their pension more like a bank account.”
Tully added that the trend of withdrawing at an earlier age means and more often will have generated a “welcome windfall for the Treasury”.
Aviva head of savings and retirement, Alistair McQueen, tweeted: “Pension freedoms market is settling (good). More are taking advantage of freedoms (good) but latest figures show no “dash for cash” (good). Trend is averaging towards withdrawal of £9k per quarter per individual. Few Lamborghinis being bought (good).”
It was not compulsory for the industry to report figures before Q2 2016, which saw a significant jump from 142,000 in Q1 2016 to 296,000 payments.
AJ Bell senior analyst, Tom Selby, said: “The good news is average withdrawals per person are not spiralling out of control. In fact, while the average withdrawal is almost £1,000 higher than in Q1 2018, it is down by about £700 on the same quarter in 2017.”
Despite this, Just Group communications director Stephen Lowe believes the figures are “narrow” as they fail to include the release of tax-free cash early in retirement, as well as giving no information on how the money is used.
He commented: “It’s an incomplete picture of what’s going on … While today’s figures reveal the average size of a flexible withdrawal is £8,595 which looks modest, we need to remember that small pension pots can make all the difference to raise peoples’ monthly living standards.”
According to Lowe, a single retiree with a pension pot of £14,000 and receiving state benefits, would meet the Joseph Rowntree Foundations Minimum Income Standard.
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