Pension freedom payouts hit 1.6bn in Q3

older couple talking

Just under 200,000 people accessed their retirement savings using pension freedom in the third quarter of the year, HM Revenue & Customs figures have revealed. 

On average, each person received about £8,000 through 2.2 withdrawals, with £1.6bn being paid out.

The figure is down from the record £1.9bn recorded in Q2 this year, when the average withdrawal also hit a low of £9,300.

The withdrawals bring the total amount paid out so far this financial year to £3.4bn, which is just over half the amount withdrawn in 2015/16, while £15.3bn has now been withdrawn since the freedoms were introduced in April 2015.

The figures come as the Work and Pensions Committee's (WPC) probe into pension freedoms closed to evidence submissions.

In evidence published so far, former pensions minister Baroness Ros Altmann said Pension Wise was an"under-used" service, leaving savers at risk from"irreversible mistakes", while an unnamed respondent slammed politicians for"fiddling with pensions legislation, moving and changing the goalposts".

The committee is due to hold its first oral hearing for the inquiry on 1 November, with statements to given by Altmann, The Pensions Advisory Service chief executive Michelle Cracknell, and Royal London director of policy and former pensions minister Sir Steve Webb.

Stephen Lowe, group communications director at Just, said the policy was exposing savers to significant risks.

"The government is running a risk that its flagship pension policy, Freedom and Choice, is exposing thousands of people every month to significant risks that are not being mitigated successfully by the government's Pension Wise service - because too few people are using it," he said.

In its interim Retirement Outcomes Review, published in July, the Financial Conduct Authority revealed that half of pots accessed through the freedoms had been fully withdrawn, with 52% of those moved into other savings or investments.

Lowe continued:"Tens of thousands of people are withdrawing large cash sums and in many cases all of their pension savings - but worryingly, they are making uninformed decisions which expose them to rogues and conmen, as well as unnecessary tax charges."

AJ Bell senior analyst Tom Selby added the government needs to make efforts to improve understanding of retirement savings among the general public.

"We are concerned that an engagement gap could be emerging among savers who use the freedoms," he said."For many, the only aim is to get their hands on their tax-free cash as quickly as possible, with little thought being given to things like investment strategy.

"The fact large numbers of people who withdraw their entire pension simply shove it in a bank account is evidence of this. Improving engagement and understanding of retirement saving needs to become a central aim for the government."

Last month, Centre for Policy Studies independent research fellow Michael Johnson, who was a key architect behind the freedoms policy, said it had led to unintended consequences.

 

This article was written by James Phillips from Professional Adviser and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.