28 Jul, 2016
Withdrawals on UK pensions more than doubles
Data published by the UK’s tax office show the amount of money savers are taking out of their pensions has more than doubled in the three months to 30 June compared to the first three months of the year.
The latest figures from HM Revenue and Customs (HMRC) shows a massive 115% quarter-on-quarter increase in the numbers of people taking cash lump sums out of their pensions, with 159,000 people withdrawing a total of £1.77bn (€2.11bn, $2.32bn) via 256,000 payments, compared to 74,000 people taking out just £820m the previous quarter.
This also compares starkly with the last quarter of 2015 when just £800m was paid out to 67,000 people via 123,000 payments.
In total, over £6bn has been paid out of UK pensions since the reforms came into effect in April last year, deVere Group.
The study, which covers April 2015 to May 2016, found that a total of 391,000 people accessed their pensions via 772,000 flexible cash lump sum payments, taking out a combined £6.12bn.
Pension reforms giving people unrestricted access to their pension savings were announced by previous UK chancellor George Osborne in April 2014, which came into effect in April 2015.
“Ultimately the purpose of a pension is to provide an income throughout retirement, so any spike in cash-outs would be concerning."
Economic secretary to the Treasury, Simon Kirby, said: “It’s only right that people should have a choice over what they do with their money and today’s figures show that pension freedoms continue to be a popular choice”.
He added, “Our pension reforms have already given hundreds of thousands of people access and responsibility over their hard-earned savings and we will continue to make sure that the pension freedoms work well for everyone”.
Meanwhile, Tom Selby, a senior analyst at online investment platform provider AJ Bell, said the figures provide the “first real picture” of the impact of the pension freedoms.
He continued, “The key measure of success is not the fact £6bn has been accessed, however – it is how the freedoms are utilised. Early data from the FCA suggests the majority of people are using the freedoms sensibly rather than blowing their pension on luxury holidays and sports cars”.
Selby urged policymakers to remain “vigilant to the risk people withdraw too much too quickly”.
He added, “Ultimately the purpose of a pension is to provide an income throughout retirement, so any spike in cash-outs would be concerning”.
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