UK pensioners have taken over £25bn ($32.5bn, €29bn) from their retirement savings under the pension freedoms since they were introduced in April 2015, figures from HM Revenue and Customs reveal.
During Q1 2019, some 284,000 people withdrew just over £2bn from their pensions – with around 648,000 individual payments made during the quarter.
This is a rise from the same quarter a year ago, when 222,000 people withdrew £1.7bn through 500,000 payments.
Not a complete picture
Helen Morrissey, pension specialist at Royal London, said: “Today’s figures show the appetite for pension freedoms remains undimmed with more than £25bn being accessed since freedom and choice was introduced in April 2015.
“With more than £2bn being accessed in the last quarter alone it is clear the reforms have injected real flexibility into people’s retirement planning.”
Stephen Lowe, group communications director at retirement product provider Just Group, added: “There is steady demand to take a flexible payment rather than a slowing down after an initial rush, although it will be a figure to watch over the longer term.
“We also need to remember that it represents only a fraction of the overall cash being accessed from pensions.
“It doesn’t include those just taking tax-free cash or accessing pensions under small pot rules, so is not a complete picture of how pension flexibility is being used.”
Decrease over the long term
Average pension freedoms withdrawals per person were £7,254 in Q1 2019, this represents a slight decrease from £7,644 a year ago, but a significant drop from £11,081 in Q1 2016, according to investment platform AJ Bell.
Tom Selby, senior analyst at AJ Bell, 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.”
Source: AJ Bell
Advice necessary
Regardless of how the stats are interpreted, there are still many people using pension freedoms, and this means retirees will need to speak to an adviser on accessing their retirement pot.
Steven Cameron, pension director at Aegon, said: “The freedoms marked a radical change in the retirement landscape, which is now almost unrecognisable from where it was before inception in 2015.
“Individuals now have much more control over their pension savings; including allowing those looking for a more gradual transition into retirement the chance to work, combining reduced hours with part pension as they approach or move beyond traditional retirement age.
“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.
“The more people who take advantage of pension freedoms, the greater is the need for access to professional financial advice.”
