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Pensions withdrawals hit close to £22bn

Pension-Pensions-savings-retirement-piggy bankNearly £22bn has been withdrawn since the pension freedoms started in April 2015 according to HM Revenue and Customs data published today.

Savers flexibly withdrew just under £2bn from their pensions in the third quarter of this year which is down slightly from the £2.3bn taken out in the second quarter.

A total 258,000 people made a withdrawal in Q3 down slightly on the record set in Q2 of 264,000.

These figures come as the number of savers being hit with emergency tax bills is also on the rise, with separate figures published by HMRC showing a record £38m was reclaimed during Q3.

AJ Bell senior analyst Tom Selby says the UK public has latched on to the flexibility the new rules gives them as more people hit age 55.

This explains why the government upgraded its estimate for the tax take from pension freedoms withdrawal this year to £400m.

He adds the popularity of the freedoms, combined with the hassle it takes to reclaim over taxed pension withdrawals, means the revenue is expected to keep rising.

Selby says it appears most people are still taking a pragmatic and controlled approach to how they manage their pension savings, with the average withdrawal per person on a downward trajectory.

There was an initial rush for cash when the new rules came into effect in 2015 but since then the average withdrawal has plunged from £18,571 to £7,597 in Q3.

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  1. It would be interesting to know just what people are doing with the money they’ve withdrawn from their pension funds. Anecdotally, many, perhaps the majority, just leave it on deposit or blow it on a new kitchen/bathroom/home extension/car/round the world cruise or whatever, when what they SHOULD be doing is building on what they’ve already accrued which, in many cases, is far too little. I remain of the view that the Pension Freedoms are a fundamentally bad piece of legislation.

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