HM Revenue & Customs has revealed that 327,000 savers took £2.4bn from their pensions in the third quarter of 2019.
That takes the total sum flexibly withdrawn since the introduction of pension freedoms in 2015 to £30.7bn ($38.6bn, €34.7bn).
After an initial surge, where the average sum withdrawn per person was nearly £19,000, there has been a steady decline in how much money people are taking out of their retirement savings.
The average withdrawal per person fell to £7,250 in Q3 2019 from £7,600 during the same quarter last year.
Unsustainable withdrawals
For Ian Browne, pensions expert at Quilter, the HMRC figures obscure of less-than-rosy picture of the pension landscape.
Citing personal finance data provider Moneyfacts, he said: “[Its] research found that 70% of savers who take a regular income from their pension withdrew 4% or more of the value of their fund each year, while almost 30% took an income of 8% or more, and around 13% have fully depleted their fund”.
He described unsustainable withdrawal rates as “the bleak shadow hovering over the success of pension freedoms”.
By spending too much, too soon; people are at risk of “pensioner poverty”, Browne added.
“The complex scenario planning for retirement means forward planning is crucial and this is why getting advice at this stage is so vital.
“In fact, the Moneyfacts findings also revealed people who do not take advice are more likely to run out of funds than those who take professional advice as almost three times more non-advised drawdown customers have fully depleted their funds than advised customers.”
Fix the holes
Despite being encouraged that the average withdrawal per person continues to fall steadily, AJ Bell senior analyst Tom Selby is in agreement that “there remain problems with the overall retirement system which demand attention”.
“The taxation of pension freedoms withdrawals is a confusing mess which can leave people facing shock emergency tax bills running into thousands of pounds, while the money purchase annual allowance (MPAA) is a brutal punishment for those who take taxable income from their fund.
“Fixing these holes so the tax system works with the retirement flexibilities should be a priority for the next government.”
A general election has been confirmed for the 12 December but the outcome is far from certain.
But with Brexit seemingly the number one priority on the political agenda, pension reform may be some way off.
