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Record numbers withdraw cash from pensions

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A record number of people withdrew money from their pensions between April and June, figures show.

In total, 336,000 savers took cash out of their pots, up 27 per cent from the same period last year, according to HMRC data.

Overall, they withdrew £2.75bn, up from £2.27bn in the same three months in 2018.

Individual withdrawals were down slightly year-on-year at £8,200 from £8,600.

Average withdrawals have been falling steadily and consistently since pension freedom rules – which allow savers aged 55 and over full access to their pension savings – were introduced in 2015.

More than £28bn has been withdrawn altogether in the four years since the pension freedoms came into force.

Tom Selby, senior analyst at investment firm AJ Bell, said: “On the whole the available evidence points to savers acting in a sensible manner, taking steady incomes from their funds rather than raiding their nest eggs and splurging in a way which could leave them struggling in later life.”

Helen Morrissey, pension specialist at Royal London, agreed, adding: “People are taking a prudent approach of taking smaller amounts as and when they need it as opposed to taking all of the money at once. This flies in the face of initial fears that people would empty their pots and leave themselves vulnerable in later retirement.”

However, experts warn that pension savers with money still invested should prepare for a rocky few months.

Selby said: “There are no shortages of potential headwinds threatening investors, from the increasing threat of a no deal Brexit to the ongoing tensions between Donald Trump and China.

“Anyone who remains invested in the stock market and is drawing an income in retirement needs to be mindful of these risks and consider the impact a severe drop in markets – and any corresponding fall in the value of their fund – could have on their future spending plans.”

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