Pension freedoms withdrawals top £25bn

The total amount of pensions that has been flexibly withdrawn since the inception of pension freedoms has topped £25bn, HMRC has revealed.

In its latest quarterly statistics release, HMRC found that £2.06bn was withdrawn over Q1 2019, bringing the total amount drawn to £25.6bn since freedoms were introduced in Q2 2015.

According to AJ Bell, average withdrawals per person were £7,254 in Q1 2019, down on the £7,644 on the previous year and significantly down on from £11,081 in Q1 2016.

Commenting, AJ Bell senior analyst, Tom Selby, said: “All the available evidence suggests that, in the main, savers continue to use the pension freedoms sensibly and are managing withdrawals with sustainability right at the front of their minds.

“The number of people using the pension freedoms continues to increase as expected but importantly the trend in the average amount per withdrawal has been consistently on a downward trajectory over the four years since the new rules were introduced.”

The number of individuals withdrawing hit a record 284,000 over the first quarter, an increase of 20,000 on Q4 2018, the second highest quarter, but the amount withdrawn continued to fall.

Aegon pensions director, Steve Cameron, believes the new figures are encouraging.

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

“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 part-way through retirement.”

Analyses by Hargreaves Lansdown also found that the average amount per payment was around £3,000, a 6 per cent decrease on the same quarter a year ago.

Hargreaves Lansdown senior analyst, Nathan Long, said: “Retirees shrugged off any Brexit concerns in the first three months of the year, avoiding the temptation to raid their pensions. Withdrawals per person and per payment continue to fall year-on-year, showing that the initial dash to cash is firmly behind us.”

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