Pension withdrawals hit £6.5bn in 2017

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpgSavers withdrew £6.5bn using the pension freedoms in 2017 according to data from HM Revenue and Customs.

This is nearly £1bn more compared to 2016 when £5.7bn was taken out of pension savings.

On a quarterly basis, nearly 200,000 people took payments from their pension totalling £1.5bn in the fourth quarter of 2017 which is slightly lower than £1.59bn taken out during the third quarter of 2017.

The total amount of money withdrawn since the pension freedoms started in April 2015 stands at £15.7bn.

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

Commenting on today’s figures Just Group group communications director Stephen Lowe says pension freedoms are well-established but the sustainability of withdrawal rates is unknown. 

He says: Savers are enjoying the flexibility of being able to exercise greater choice about how to use their pension savings. More than £6.5bn was withdrawn last year, up 15 per cent from 2016, and there’s a school of thought that says that much money can’t be wrong.”

However, he adds: “But the truth is we don’t know – the industry still has little idea whether these savings are being used sustainably.”

Hargreaves Lansdown senior pensions analyst Nathan Long suggests the fall in the amount withdrawn in the fourth quarter could be evidence of prudence among retirees.

He says:Rather than use pensions to splurge on an extravagant Christmas, retirees have operated restraint when managing their pensions showing the new rules are bedding in nicely and the amount being withdrawn is stabilising.

“The number of payments made has increased, but this is simply a reflection of more and more people using drawdown for their income in retirement.”

He adds: “The fact the rate of growth is slowing actually shows that the dash for cash is abating and retirees are facing up to managing their pension pot to provide for their life after work.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Just look at the tax taken! This has little to do with client choice and everything to do with tax grab. Along the way fund managers, platforms, providers and advisers are making tidy sums. I do wonder what the total cost to clients actually is?

    After these withdrawals how much is left in the pot? Will these people run out of money? And then what?

    Presumably the Regulator is unconcerned as by the time the effluent hits the ventilator they will have all taken their own generous pensions and started to polish their gongs.

  2. Transferring to Income DD isn’t a withdrawal and has little if anything to do with the Pension Freedoms, it’s been an available option for decades, albeit with withdrawal limits.

    Of greater relevance and possible concern are how much has been cashed out of the pensions medium altogether or transferred to UCIS via flaky SIPP’s.

  3. I think it’s virtually certain that pension freedom will at some point become a supposed misselling scandal.

    Although we have many clients taking sensible options, we have also seen more than a few just grabbing the money to run and will undoubtedly fall back on social security at a later point when the money runs out.

    Then there are the otherwise intelligent clients who are insistent they want to take much more than they should.

    I guess the regulators point that the average person values money now far more than money in the future is being proven..

    • The means-testing process for state benefits takes into account the income generating capacity of both unvested and cashed out pension benefits. The state system is designed not to put claimants back in the same position as if they hadn’t done the latter and squandered the proceeds, assuming, of course, that they declare having done so, which many may well not. What, if any, processes the relevant bodies haver in place to detect non-declaration I know not.

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