Withdrawals under pension freedoms average £3,000
In total, 258,000 people aged 55 and over took advantage of the pension freedoms rules, withdrawing just shy of £2bn in Q3 2018.
Since the introduction of pension freedoms in 2015 which allows those aged 55+ unfettered access to their pots, £21.7bn has been taken flexibly.
And the latest figures from HM Revenue & Customs (HMRC), reveal Q3 2018 was the busiest period as the number of payments reached a record high of 585,000.
Nathan Long , senior pension analyst at Hargreaves Lansdown, said: “Retirees continue to manage their money sensibly, as an increase in the number of pension withdrawals masks the fact that the value of each withdrawal has now stabilised at between £3,000 and £4,000. Many of these withdrawals are now courtesy of the retire-as-you-go generation drawing on their pension again and again for long-term income as their lifestyle dictates.”
However, pension savers need to watch for tax incurred on withdrawals.
Tom Selby, senior analyst at AJ Bell, said: “One of the real thorns in the new rules is the tax treatment applied to people making their first pension freedoms withdrawal. In most cases an emergency tax rate will be applied to these withdrawals meaning people pay more tax than they should do.
“This can be reclaimed but it is a hassle and doesn’t help the fact that the withdrawal will be lower than the individual expected. Earlier this week HMRC reported a record £38m of this overpaid tax was reclaimed by investors in Q3, yet it seems to have no intention of changing the rules.”
Related: See YourMoney.com’s guide on How to reclaim pension freedom tax for more information.