Data from HM Revenue & Customs reveals that the quantity and value of withdrawals following Pension Freedom’s introduction has hit a new peak. We cover experts’ views on the latest figures.
There is little doubt that Pensions Freedom is up, running and having an impact on the financial decisions made by the retired and those over the ‘minimum pension age’ of 55.
The latest statistics from HM Revenue & Customs (HMRC) show that a record number of payments, individuals taking payment and near-record total value of payments occurred in the first quarter of 2018.
Some 500,000 payments were made to 222,000 individuals, totalling nearly £1.7bn.
The initial numbers collated post Pensions Freedom introduction in 2015/16 were not comprehensive as they posting data was optional. But in the second quarter of 2015 some 121,000 payments were made at a value of £1.6bn.
Following mandatory information filing by the pensions industry, a steady £1.5bn+ in value of payments have been paid out every quarter, with more than £17bn paid out since its introduction.
AJ Bell’s Tom Selby said the figures illustrate the “obvious” popularity of the initiative, reported The Telegraph. Moneyhub’s Samantha Heaton told the publication that the flexibility brought into “sharp focus” the importance of financial advice.
“But as customers find their finances increasingly fragmented across multiple providers, it can often be a real challenge for advisers to get a true picture of their clients’ financial situation,” she told The Telegraph.
Just Group communications director told Professional Adviser that, as the figures only represent taxable money withdrawn from pensions, large tax-free amounts will also have been drawn down as well.
In a recent editor’s comment, Faith Glasgow of Money Observer warned that those drawing down funds weren’t necessarily better off for it. Glasgow cited recent Financial Conduct Authority stats that showed more than a third (37%) failed to take advice before drawing down.
“The trouble is that drawdown is a complicated beast that must be carefully corralled to ensure the fund lasts a lifetime. And that ideally means taking professional advice, at least at the outset,” she said.
Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance.
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