Critics said the new pension freedom rules, which have seen £14bn ($18.4bn, €15.7bn) withdrawn from pensions, were irresponsible and would encourage profligacy. Instead, money was mostly put in banks and average withdrawal per person hit a new low (£8,030) in 3Q17.
Online investment platform AJ Bell suggests the FCA data shows “people aren’t on the whole splurging irresponsibly”, even if 40,000 more people chose to access their retirement pot flexibly in 3Q17 versus the same period in 2016.
Engagement gap
Tom Selby, senior analyst at AJ Bell, notes that while the average value of withdrawals per person continues to fall, he argued the government must address the engagement gap to ensure savers make the most of the freedoms.
“The fact people are on average taking less out per quarter doesn’t point to mass irresponsible spending,” he said. “Although we need a wider picture of people’s incomes and personal situations to draw firm conclusions.
“£14bn has been withdrawn from pensions since the freedoms launched in April 2015 and these latest figures set the scene for the forthcoming Work & Pensions Committee inquiry into the reforms.
“It is the manner of these withdrawals that is key, however, and specifically the sustainability of people’s retirement spending.”
AJ Bell is concerned that an engagement gap could be emerging among savers who use the freedoms, with little thought to sustainability, and is lobbying for greater understanding of retirement saving needs.
