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Pension withdrawals hit £2.3bn in second quarter

File image of a pension savings potSavers withdrew £2.3bn using the pension freedoms in the second quarter of this year, according to data from HM Revenue and Customs.

This is an increase of 35 per cent compared to the first quarter of the year when £1.7bn was withdrawn.

There were 574,000 payments made to 264,000 people over the second quarter which takes the total amount of money withdrawn since the pension freedoms started in April 2015 to £19.8bn as of 31 July.

On a year-by-year comparison, 403,000 payments were made to 200,000 people totalling £1.9bn in the second quarter of 2017.

The data from HMRC covers “flexible payments” from pensions, which include full or partial withdrawals, flexible drawdown and buying a flexible annuity.

Retirement Advantage pensions technical director Andrew Tully says: “Many people are also making multiple withdrawals in a tax year, which suggests they are treating their pension more like a bank account. Most people are accessing their pensions at younger ages, certainly before state pension age.”

He adds: “This combination of taking multiple withdrawals in a tax year at earlier ages when people are still likely to be earning income from work means many are likely to pay more tax than if they took withdrawals more gradually.

“Treating pensions like bank accounts has certainly generated a welcome windfall for the Treasury due to the extra tax take, which has not been the natural brake some commentators predicted.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 31st July 2018 at 1:43 pm

    And how many of those who’ve taken these withdrawals, in a few years time, regret having done so?

  2. “Many people are also making multiple withdrawals in a tax year, which suggests they are treating their pension more like a bank account.” says Andrew Tully.
    Or they could be treating it just like a pension taking regular income payments throughout the year?
    Also, the fact that there was a 35% increase over Q1 suggests to me that people are perhaps taking a lot of notice of tax by deferring a withdrawal until the new tax year started when they have a full year’s personal allowance available?!

  3. Ah – a windfall for HMRC, for SIPP Providers, for the platforms and – of course – for advisers.

    In the long run I wonder if many clients wouldn’t have been better off with an annuity?

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