Figures from HM Revenue & Customs (HMRC) suggest almost £17.5bn has been flexibly withdrawn since the inception of pension freedoms, but that numbers do not reflect ‘the bigger picture’, according to one industry expert.
The latest government figures show 500,000 flexible payments were made to 222,000 people in the first quarter of 2018 – the highest number of payments to the most people since the freedoms were introduced in April 2015.
The average withdrawal per person was £7,644 – up slightly from the previous quarter, where the average was £7,595.
Just Group communications director Stephen Lowe suggested, however, the findings were not an accurate representation of the whole story. “These are a very specific set of figures that don’t reflect the bigger picture,” he argued. “They only cover taxable money withdrawn from pensions under the new rules.
“We know from other sources the over-55s are taking large amounts of tax-free cash using flexi-access drawdown, which is not included in the data reported – and neither is the tax-free cash element of uncrystallised funds pension lump sums.”
He added: “On top of this, purchases of guaranteed income for life solutions and any withdrawal from pre-2015 capped drawdown accounts are not included.”
‘Reckless conservatism’
For his part, AJ Bell senior analyst Tom Selby suggested the figures helped give a “clearer picture” of how savers are using pension freedoms.
“Three years on from the launch of the pension freedoms, we are beginning to get a clearer picture of how savers are using the flexibility,” he said. “The popularity of the reforms is obvious, with half a million flexible payments made to more than 200,000 people in the first three months of 2018.”
Selby said that, while there was evidence some people may be taking too much too soon from their retirement pots, there was nothing to suggest it was a widespread problem.
“Indeed, many remain concerned that ‘reckless conservatism’ – where people take too little from their funds and struggle to make ends meet – could prove to be just as significant a problem,” he warned.
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