Number of pension freedom withdrawals hit record high in Q3

Flexible pension withdrawals hit a record high of 585,000 in Q3 2018, according to HMRC, up from 574,000 in Q2 2018.

In its report, Pensions Flexibility November 2018, HMRC found that these payments were made to 258,000 people with an average payment of £3,350.
However, these figures were down slightly from Q2 2018, when 264,000 individuals made flexible withdrawals of an average of £3,955.

As a result, the total value of payments was also lower than in Q2, down to £1.96bn from £2.27bn.

Hargreaves Lansdown senior pension analyst, Nathan Long commented: “Retirees continue to manage their money sensibly, as an increase in the number of pension withdrawals masks the fact that the value of each withdrawal has now stabilised at between £3,000 and £4,000. Many of these withdrawals are now courtesy of the retire-as-you-go generation drawing on their pension again and again for long term income as their lifestyle dictates.”

HMRC’s report also revealed that the total value of flexible withdrawals since pensions freedoms were introduced in 2015 up to £21.7bn.

In Q3 2018, the average withdrawals per person hit its lowest number since freedoms was introduced, down to £7,597.

AJ Bell senior analyst, Tom Selby, believes that the UK public have “latched on” to the flexibility pension freedoms provides.

He added: “It looks like most people are taking a pragmatic and controlled approach to how they manage their pension savings with the average withdrawal per person on a downwards trajectory. There was an initial rush for cash when the new rules came into effect in 2015 but since then the average withdrawal has plunged from £18,571 to £7,597 in Q3 this year.”

Additionally, the number of savers being hit with emergency tax bills also on the rise, with separate figures published by HMRC showing a record £38 million was reclaimed during Q3.

Selby explained: “In most cases an emergency tax rate will be applied to these withdrawals meaning people pay more tax than they should do. This can be reclaimed but it is a hassle and doesn’t help the fact that the withdrawal will be lower than the individual expected.”

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