The number of people making withdrawals from their pensions has hit a record high, according to the latest HMRC figures.
In the third quarter of 2018 there were 585,000 withdrawals made under the new pension freedoms. This increased from 574,000 in the second quarter of the year.
These payments were made to 258,000 people, with the average withdrawal being £3,350.
However there are concerns that people are not getting sufficient advice when it comes to utilising these pensions freedoms.
Aviva’s head of savings and retirement Alistair McQueen points out that the number of people accessing their pension savings has led to a bumper tax take for the government.
He explains: “Pension withdrawals can incur tax, and the popularity of the pension freedoms is resulting in a tax bill for savers far higher than initially projected by the Government.
“Initial projections estimated that the freedoms would raise an additional £2.1bn in tax revenue in their first four years, to the end of this tax year.
This week’s Budget blew this figure out the water, with the total tax revenue now projected to hit £5 billion over this period.”
He says more needs to be done to support customers using these pension freedoms, to ensure money is taken in the most tax-efficient way. He says this can be done via pension providers, the free Pension Wise service or the financial advice community. Others have proposed more assistance via the workplace.
However Hargreaves Lansdown senior pension analyst Nathan Long says there is no cause for concern that retirees are running down their pension funds.
He says: “These figures show that retirees continue to manage their money sensibly, as an increase in the number of pension withdrawals masks the fact that the value of each withdrawal has now stabilised at between £3,000 and £4,000. Many of these withdrawals are now courtesy of the retire-as-you-go generation drawing on their pension again and again for long term income as their lifestyle dictates.”
The figures show that since pension freedom rules were introduced there have been 4.86 million flexible payments since April 2015. This figures is expected to breach the 5 million mark by the end of this year.
McQueen adds: “The freedoms are a good news story for pensions. Greater control has been celebrated by those aged 55 and above, and Aviva’s own research suggests that the prospect of greater control is also acting as an incentive to younger people – with one-in-three of those aged under 55, and half of those aged 25-34 reporting that greater flexibility encourages them to save more.”