More people are using pensions freedoms to access their retirement savings, but the amount they are individually withdrawing has continued to fall, according to new data from HMRC.
This latest quarterly figures show savers withdrew £2.4bn between July and September this year. This is a 21 per cent increase on the amount withdrawn in the third quarter of 2018.
In total £30.7bn has now been withdrawn from pensions since these pension freedom rules were introduced in 2015.
However over the last quarter the average withdrawn per person has fallen: from £7,600 in quarter three last year to £7,250 in the most recent quarter.
In total 327,000 people made 778,000 withdrawals over this period. The data shows that regular withdrawals are becoming the norm, with the number of withdrawals per member hitting a record high of 2.38 for the period.
AJ Bell senior analyst Tom Selby says: “The pension freedoms are now firmly embedded in the UK retirement landscape. Encouragingly, the average withdrawal per person continues to fall steadily, suggesting people are thinking carefully about how to spend their hard-earned pension rather than risking retirement ruin with an ill-advised binge.”
Hargreaves Lansdown senior analyst Nathan Long adds: ‘People are drawing less from their pensions and doing so more regularly, which gives yet more evidence that people are sensibly managing their money into retirement.
“New pensions rules came along in a hurry, but they are bedding down and for the most part working well. Withdrawals are in line with the on-going trend for drawing out less.”
However he adds that the “real test” may come if the stock market suffers a more serious setback. Since the introduction of pension freedoms the investment climate has remained relatively benign. A more severe crash could cause panic among retirees and a dash to encash pensions savings, which is unlikely to be in people’s best long term interests, Long says.
Selby adds that although pension freedoms seem to be working well 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.”