The latest HM Revenue and Customs statistics on flexible payments from pensions shows the average withdrawal per person in 4Q17 was £7,596 ($10,618, €8,655).
This is almost £2,000 lower than the 4Q16 average of £9,630.
Despite the lower withdrawal average, the statistics show that a higher number of pensioners are taking flexible payments from their fund with 198,000 in 4Q17 compared with 162,000 in 3Q16.
The figures also show that, in total, almost £16bn has now been withdrawn from pensions since the freedoms rules were introduced in April 2015.
Trending down
Tom Selby, senior analyst for AJ Bell, said the drop in withdrawals continues a downward trajectory.
“While this is not, in itself, evidence that savers aren’t at risk of making unsustainable withdrawals from their pensions, it equally isn’t a smoking gun requiring emergency regulatory or government intervention,” Selby said.
He said any government intervention in flexible payments needs to be based on evidence, rather than rhetoric.
“The sustainability of withdrawals and consumer engagement are central in the [Financial Conduct Authority’s] Retirement Outcomes Review.
“Indeed, our own research suggests many savers are entering drawdown simply to take their tax-free cash, without thinking properly about where their money is invested or how and when they are going to draw an income.
“Boosting engagement therefore needs to be a priority for policymakers across the FCA, Treasury, the [Department for Work and Pensions] and [The Pensions Regulator],” Selby said.
Drawdown concerns
Selby also commented on an amendment to the Financial Claims and Guidance Bill that looks to address concerns about savers who do not take financial advice when entering drawdown.
This amendment would require providers to book a Pension Wise appointment on behalf of customers, which Selby says could potentially cause more harm than good.
“Placing a guidance barrier in the way of savers at the point they are accessing their pension – when they have already decided, possibly having already consulted Pension Wise, that they want the money – risks creating a tidal wave of complaints,” Selby said.
He said it would be much better to nudge people to guidance before they have reached this point.
