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Savers withdraw £1bn using pension freedoms

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Savers have withdrawn more than £1bn from their pension pots since the introduction of radical new freedoms in April this year, Chancellor George Osborne says.

Osborne says 60,000 people have utilised the new flexibilities in the weeks since they became available. However, the Treasury has not disaggregated the data to provide more granular information such as the average pot size of these individuals or how much of their pot they have taken out in one go.

Answering questions during a House of Commons debate earlier today, Osborne also issued a warning to providers who are not allowing their customers to access the freedoms.

He said: “I can give the House the latest numbers — indeed, the first numbers — on how many people have taken advantage of the freedoms.

“So far, in the few weeks since they came into effect, 60,000 people have made use of them.

“More than £1bn has been transferred out of people’s pension funds as a result. It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds and that companies up their game in helping customers make use of these freedoms. We will be watching these things very carefully.”

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Comments

There are 20 comments at the moment, we would love to hear your opinion too.

  1. I wonder how much tax has been paid on that sum ?

  2. Julian Stevens 16th June 2015 at 3:37 pm

    A real success? How is it a success for people to have:-

    1. cashed in their retirement income pots,

    2. been hit for a load of tax on three quarters of it,

    3. quite possibly blown the rest on some short term extravagance and then

    4. have left a great deal less, possibly nothing at all, from which to derive a private income in retirement?

    Answers on a postcard please.

  3. David Johnston 16th June 2015 at 3:46 pm

    It would be interesting to see how many of those 60,000 people are doing anything which they could not have done previously. I suspect that this stat means “60,000 folk have accessed their pension benefits since 6 April.” But of course I stand to be corrected should HMT provide a more detailed breakdown of the numbers.

  4. John Hutton-Attenborough 16th June 2015 at 3:52 pm

    60,000 potential claims then….and counting!

  5. terence o'halloran 16th June 2015 at 3:56 pm

    What asset class has been encashed and what is the quantum of the damage done to retained investments in the funds concerned. Ask George Osborne he is bound to know. Or perhaps Steven Webb in retirement will have the time, and skill, to work it out.

    How long will it take for liquidity to become a serious problem?

  6. I read with some interest and considerable concern the awful story of a unicyclist in Hoe Street, London E17 who collided with and got trapped under a route 210 London Bus. What followed was a fantastic example of people power from some 50 or so people who tried and succeeded to lift the bus of the trapped man allowing him to be taken to hospital, in a very serious condition.

    Cycling in London is not the safest of activities as many cyclists who have had a ‘near death’ experience with HGV’s would attest. Heavy goods vehicles are responsible for over half of all cyclist deaths in London, a third across the UK as a whole.

    But, despite these numbing statistics, the E17 unicyclist is a perfect example of somebody doing something stupid while being quite oblivious of the fact that most others would see it as extremely stupid.

    Cyclists and other road users are warned over and over again to exercise extreme care in London and other busy cities. Cyclists are told not to undertake trucks, especially at road junctions. Trucks have signs advising caution and many are now fitting a vast array of safety devices to warn the driver of collision possibility.

    For many who have driven in London, especially in peak commute times, the car driver experience of cyclists use of the road is simply terrifying and I suspect it is a mutually shared state of terror for those on two wheels.

    But the two wheel brigade in London (and I count my self as an occasional member of that club but not in London) test the ‘nine lives’ principle to the very edge. For so many cyclists, traffic lights are simply a suggestion, pavements and zebra crossings are their cycle superhighway if one does not exist and if you hit a cyclist, or they hit you as they weave precariously from one driver blind spot to the next, heaven help you.

    I cannot help noticing that despite the rules of the road, defined by the Highway Code and the Road Traffic Act, attempting to provide a sense of order and a feeling of safety for all road users, it does not always work out that way. All because some road users do something stupid, unlike the unicyclist, knowing it is really stupid and expect others to take responsibility for their stupidity.

    So, why am I rambling on about this?

    Because the analogy of linking cyclists, HGV’s, responsibility and common sense could be applied to be safeguarding people’s retirement funds.

    We now have the ‘fiscal unicyclist’ about to do something stupid, not knowing it is stupid because……..the government says they can ‘cycle’ but without any proficiency training, test or understanding of the dangers.

    Last month it became clear that for one major provider, 70% of savers exercising their new ‘pension freedoms’ withdrew the lot in the first 6 weeks of the so called pension revolution coming into force.

    Yet only 3% of those savers who contacted the firm had spoken to Pension Wise!

    Panacea predicts that the ‘harvest outcome’ from pension freedoms will be “the next PPI scandal”. The Government is giving retirees the freedom to do what they want with their ‘hard-earned’ and those pension reforms and freedoms are about to present the same risk opportunity to investors and pensioners that Hoe Street E17 offered the unicyclist. Their road will be fraught with some very clear dangers and many that are hidden.

    Regulation and legislation needs to catch up with the retirement superhighway quickly as I suspect that those retirees who are doing their Lamborghini based ‘risk assessments’ may expect, but not get, public sympathy if they decide to do something stupid.

    Warnings will be ignored and the rogues devising cunning plans to no doubt deny many the retirement they have saved for will not care at all about the damage and stress caused their selfish, boorish, poorly regulated behaviour.

    They say that wherever there is blame there’s a claim. If ever there was a time to urge caution it is now.

    Which brings me back nicely to the unicyclist.

  7. John-Dale McCallum 16th June 2015 at 4:07 pm

    People need to take responsibility for their actions… Osborne has offered choice, if you are mad enough to en-cash your pot and pay insane sums of tax then you live with that decision. We need to get away from these nanny idea’s that the State needs to make all decisions. Essentially, the ball is in our court now! People will now live or die by their own sword.

  8. The last time some shouted freedom he was hung-drawn and quartered. We need to exercise extreme caution in this new world of pension FREEDOM if £1BN of outflows were coming from ISA funds or treasury bonds there would be a government outcry.

  9. Disgraceful, how dare they !

  10. Roughly 600,000 people turn 65 in the UK every year so 60,000 taking pension freedoms – bearing in mind that many of them will have delayed taking benefits in order to take advantage – is not a particularly startling number.

    Someone who transfers to flexi-access drawdown is probably counted as using “pension freedom” even if in a non-pension-freedom parallel universe they would just have transferred to capped drawdown.

    The £1bn “transferred out” is totally meaningless without a breakdown of how much of that £1bn was actually full encashment, how much was transferred to drawdown funds, how much to annuities, etc. But on average that’s £16,667 for each of the 60,000, which many people could withdraw in one go without paying any additional tax, so the Treasury probably isn’t counting the windfall just yet.

  11. So taking an average 30% for tax – Crafty George has trousered a windfall £300 million in a scant 3 months. This boys & girls is what pension ‘freedom’ is all about. The industry enthusiasts for this scam are either gullible, greedy or plain stupid – take your pick.

  12. Maybe some paid off their mortgage or other loans, which they are paying with taxed money, with pots of £20k or so. hardly enough to really damage their future retirement and it gives them more cash in their pockets now, whilst they have legs.

  13. ” Dear Mr Client. Mr Osborne has wisely decided that you may access your pension funds without restriction, suggesting that you may wish to take guidance or advice before making that decision. As you have decided to reject my advice, I must concede to your judgement and that of a higher authority, the Chancellor, and facilitate your request. Should you feel the need to make a complaint at a later stage, I will not be answering any communications from you, which should be addressed to To whom it may concern, 11 Downing Street, Westminster. ”

    That should do it, not my problem anymore.

  14. @Geoff Sharpe. Your point is very clear and your warning equally as clear. I predict it will not be sufficient defence against a FOS complaint ten years hence. Best not to implement at all if your advice is don’t do it.

  15. That’s about £17k a head on average, if my maths is correct.

    Nothing to say!

  16. Paul Underwood 17th June 2015 at 9:55 am

    Personally, I have more faith in human nature! If someone has been conscientious enough to save money for year after year why shouldn’t they then be able to spend that money in a way that THEY feel benefits or enhances their life? Not everyone that has saved money will blow it you only need to look at the Australian study into pension freedoms to realise this.

  17. How come you have firms being threatened with fines for falling over auto enrolment trip wires (the implication being that building up a valuable pension is just that) yet 30 years down the line the message is then ‘yeh you’ve got a pension pot but don’t be precious about it’

    No consistency in message

  18. BREAKING NEWS: People Allowed Access To Their Own Money

  19. So far most of my post freedoms advice has actually been to lower income levels as there is no better place to have your money than a pension (provided you have the appetite and capacity for the risk involved). Although I have refused to act for one potential client as I couldn’t put my name to a report that recommended one thing and the outcome was so widely different. Largely I think that those cashing in their entire pension pots are those who would not have sought advice in the first place. Those who do will be convinced of the merits of not cashing in their entire pot. I agree with the other commentators that the message from government is mixed. When saving people need to be coerced, forced and led by the hand but once saved the stabilisers come off and people suddenly become financially savvy.

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