Pension cash withdrawal amounts continue to fall
In the last three months of 2019, £2.2bn was withdrawn from pensions flexibly, according to HM Revenue & Customs (HMRC) figures.
While this is an increase of 18% on the £1.9bn accessed in the final quarter of 2018, the average amount withdrawn per person has fallen. The figure stood at £6,800, falling 5% from £7,200 in the same period a year ago.
In total for the three months to December 2019, 327,000 people withdrew money from their pensions. This is a 24% increase on the 264,000 reported in Q4 2018.
HMRC said the continued lower number of individuals compared to Q2 reflects the “normal seasonal pattern” as withdrawal numbers typically peak in Q2 as it coincides with the beginning of a new tax year.
“This seasonality comes as some individuals access their pension over a number of years and often use the flexibility to withdraw funds at the beginning of the tax year,” the report noted.
The pension freedoms were introduced in April 2015. They gave anyone aged 55 and over the ability to access as much of their pension savings as they want. The first 25% can be withdrawn tax-free and the remaining 75% is subject to the person’s marginal rate of income tax.
Pension freedoms gave retirees more flexibility and effectively removed the requirement for them to buy much-criticised annuities.
Since their introduction in April 2015, the total value of flexible withdrawals has reached almost £33bn.
‘Individuals exercise restraint’
Steven Cameron, pensions director at Aegon, said: “Today’s figures show the UK public’s love affair with the flexibility pension freedoms offer continues to hot up with a record number of 828,000 payments in Q4 of 2019. Reassuringly, the average withdrawal amount continues to fall, down 5% in value compared to a year ago, suggesting individuals are exercising restraint around how much to take as an income.
“With people living longer, proper retirement planning is needed to safeguard people’s wealth, particularly if choosing to use flexible drawdown in retirement. Here, retirees remain invested in the stockmarket raising concerns over the impact a major fall could have on their retirement prospects including the risk of running out of money if they withdraw too much too soon.
“Seeking professional financial advice can give peace of mind that your financial affairs are being taken care of, whether that’s about having enough secure income to cover the basics, taking a sustainable regular income, or investing wisely.”