Almost £2bn withdrawn under flexible pension rules in Q3

With £5.9 billion withdrawn from 1.66 million payments through the year to date, 2018 is on track to exceed 2017 on both counts when 1.67 million payments were made totalling £6.54 billion in cash withdrawn.

The value of payments in each year follows a consistent trend, of increased withdrawals towards the start of the year and lower withdrawals in the remaining three quarters of the year.

Stephen Lowe, group communications director at Just Group, says that the figures are growing evidence that drawdown, particularly non-advised drawdown, is becoming increasingly common for those entering retirement especially in the context of FCA research published in the past few weeks:

Lowe added:

“Looking at these figures alongside the recent FCA’s Data Bulletin and last week’s FCA Product sales figures, it is evident that trends are emerging in a post-freedoms landscape.

“While the ‘dash for cash’ has not yet materialised as many feared, the data provides clear evidence that people are changing their behaviour. HMRC’s report show that in 2018 a record number of payments were made to a record number of individuals and resulted in a record value in the amount of cash withdrawn; at the same time the FCA just reported record sales of income drawdown products for Q2 2018.

“Investing in a pension drawdown product is not for the faint hearted – it’s complex and can be risky. So we should be concerned that the FCA announced people did not get financial advice on nearly a third (31%) of pots that entered drawdown, and sales without advice reached a post-freedoms high in Q2 2018."

Samantha Seaton, CEO of Moneyhub, commented:

“Over half a million payments have been made from pensions since the freedoms were first introduced in 2015. Not only does the option for early withdrawal give people much more flexibility, but boosts employee engagement with savings and workplace pensions.

“What’s concerning is that there seems to be a significant lack of education and attention from product and service providers for those nearing retirement, when it’s vital this group of people receives enough advice and support to help them make the right decision. Optimising money in retirement is as important as building up a savings pot, and while withdrawing cash early might be the right option for some, ultimately it will have an impact on their long term retirement plan.

"Providing people with real-time visibility of their savings, alongside support and awareness, will help to keep them on track for retirement.”