You are here: Home - Retirement - Retirement planning - News -

Pension freedoms withdrawals fall to new low

Written by: Danielle Levy
The value of an average withdrawal from a pension fell by 30.5% between 2016 and 2018.

New figures released by HMRC show that the average so-called ‘pension freedom withdrawal’ has fallen from £7,597 per person to £7,197 during the fourth quarter of 2018.

This represents a record low since the pension freedom laws were introduced in April 2015. These rules banned compulsory annuities and gave those aged 55 and over full access to their pension assets, to spend, save or invest as they wish.

The data revealed that a total of 264,000 people withdrew £1.9bn from their pensions during the final quarter of 2018. Meanwhile, more than one million people have taken advantage of making withdrawals from their pension pots, totalling and £23.6bn, since the rules were introduced.

Ian Browne, pensions expert at wealth manager Quilter, said the drop in the value of withdrawals shows that initial concerns that pensioners would use their pension pots to buy fancy cars have proven to be unfounded.

“While the fourth quarter has generally seen lower values, the exact rationale for the drop is not clear, it could be people are getting used to freedoms or it could be concerns about falling markets,” said Browne.

The drop in withdrawal values could well be down to stock market volatility last year.

“Millions of savers in drawdown have faced torrid markets during 2018, with the FTSE 100 down 12% and most funds delivering negative investment returns. In these circumstances it can be sensible to cut back withdrawals in order to ensure you don’t run out of money during retirement,” explained Tom Selby, senior analyst at investment platform AJ Bell.

He added that the past 12 months will have been difficult for anyone who entered drawdown, where a variable income is drawn from your pension fund which remains invested through retirement. This is because large income withdrawals may have been just as markets started to sell off.

“Anyone in this situation has an uphill task to recover the losses they have made, and will be praying for a better year for their investments in 2019,” Selby added.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape for summer, and moving your cash savings to a higher paying deal is ...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Pregnant women to receive better job protection

The government plans to improve job protection to pregnant women and new parents who are returning to work.