More than 100,000 people have withdrawn all their pension savings since pension freedoms were introduced in April 2015, with almost 200,000 accessing some cash in Q3 of 2017 alone, new figures show.
HMRC figures on pension freedom usage show 198,000 people took payments totalling £1.59bn in Q3 2017, an increase on the 158,000 people that took £1.54bn in the same period last year.
So far this tax year we have seen £3.450bn in flexible pension payments, an increase of 4 per cent on the £3.31bn withdrawn in the first 6 months of the 2016/17 tax year.
A poll of carried out by Just found that 7.7 per cent of those who had utilised pension freedoms had ‘withdrawn all their savings from their main pensions pot’.
Just Group group communications director Stephen Lowe says: “At a time when the pension freedom policy is under parliamentary scrutiny, Just Group research indicates that around 44,000 people will have withdrawn all of their main pension savings in the first 9 months of this year and more than 100,000 since the freedoms were introduced.”
“The government is running a risk that its flagship pension policy, freedom and choice, is exposing thousands of people every month to significant risks that are not being mitigated successfully by the government’s Pension Wise service – because too few people are using it. Tens of thousands of people are withdrawing large cash sums and in many cases all of their pension savings – but worryingly, they are making uninformed decisions which expose them to rogues and conmen, as well as unnecessary tax charges.
“We have called for a radical change in policy so that people are auto-enrolled into the government’s free, impartial guidance service, Pension Wise before they access their defined contribution pension benefits. This will provide them with help to make better informed decisions and to ensure their hard earned pension savings are used in the best way to provide a sustainable source of money in later life.”
Hargreaves Lansdown senior pension analyst Nathan Long says: “Keeping your pension invested whilst drawing either lump sums or a regular income continues to grow in popularity, so it is no surprise that the value and number of people taking flexible payments has increased. This will be a boost to the Treasury and bizarrely may stave off any further tinkering to pension allowances and reliefs in the forthcoming Budget.
“This further evidence will surely feed into the Pension Select Committee’s enquiry into the success of pension freedoms. On the one hand pensions have never been more popular as retirees’ craving for control is met, on the other it is no good watching your money run out prematurely, albeit whilst being the master of your own destiny.
“The period following the pension freedoms has been one of rampant stock market returns, so many investors new to drawdown may never have fully experienced a drop in the value of their investments.
“For most people, having sufficient guaranteed income to cover the retirement essentials will be a sensible choice. State and final salary pensions are the obvious sources of secure income, but annuities are a useful top up. Annuity rates remain suppressed due to the prevailing low interest rates, yet have leapt by 16 per cent since last September. You now get more for your money than a year ago, meaning now could be a great time to revisit your long term retirement plans.”