Pension freedom withdrawals rise 21% to new record high

This represents a new all-time high, up by 21% from the previous peak of £2.27bn in Q2 2018.

Strong Q2 figures have previously been driven by larger value withdrawals as some taxpayers plan their withdrawals around the start of the new tax year, However HMRC says this year's rise has been driven by increased numbers of individuals withdrawing.

A record 336,000 individuals withdrew from pensions in Q2, a 27% increase from 264,000 in the same quarter last year.

In total, nearly £5bn has been flexibly accessed from pensions so far in 2019 and over £28bn since the introduction of pension freedoms back in 2015.

Emma Byron, managing director at Legal & General Retail Retirement Income, commented: “Thousands of people are continuing to unlock their pension wealth before retirement, but there is a flipside to the flexibility offered by pension freedoms. The responsibility to make decisions about later life income now rests with consumers and many are deciding what to do with their pension without taking advice or guidance. A third of retirees are spending less than a week on deciding how they will fund their retirement. One in four over-55s are even unaware they have to pay tax on their pension savings.

As an industry, we still leave it up to the consumer to figure out which pension product is right for them – this needs to change. Rather than product packs, we need to talk to customers about their plans and ambitions for later life. Whether people buy an annuity, invest or have a combination of solutions, we need to support them with good guidance and encourage them to seek advice. This will help them to make informed decisions about their pensions so they can enjoy a retirement they aspire to.”

Stephen Lowe, group communications director at Just Group, added: “While Q2 usually represents a high point for flexible pension withdrawals following the start of the new Tax Year, the jump in 2019 is bigger than ever before and represents a 21% increase from the previous high recorded over the same period last year.

“But billions of pounds of tax free cash payments are not included in these figures nor are many other pension withdrawals, such as small pot withdrawals or purchases of guaranteed income for life solutions. On top of this, the figures don’t tell us how much individuals have withdrawn or how often.

“More than four years on from the introduction of pension freedoms we still do not have anywhere approaching complete information on how these reforms are influencing the retirement outcomes of millions of people.

“In the absence of any meaningful data it’s absolutely essential that the FCA prioritises the challenge the government has set it to ensure everyone receives independent and impartial guidance before accessing their pension savings – making sure that choosing not to take guidance is an active, rather than a passive, choice.”