Pension Freedom Withdrawals Rise by 18%

According to the latest data from HMRC, pension freedom withdrawals in the UK increased by 18% in Q4 compared to the same period in the previous year. A total of £2.2bn was withdrawn from pension savings in Q4, bringing the total value of flexible withdrawals since the introduction of pension freedoms in 2015 to almost £33bn.

What are the numbers?
In the last quarter (Q4), people in the UK took out £2.2 billion from their pension savings. This is an 18% increase compared to the same time the previous year when £1.9 billion was taken out.

However, even though more money was taken out overall, the average amount that each person took out was actually less compared to the previous year. Last year, on average, people took out £7,200 each, but this year it dropped to £6,800.

What’s the bigger picture?
Since some changes were made in 2015 called ‘pension freedoms’, people have taken almost £33 billion out of their pensions in a flexible way. These pension freedoms allowed people more choices in how they take money out of their pensions.

In the last quarter, 327,000 people decided to take some money out, which is 24% more than the same time the previous year.

An interesting note is that there seems to be a pattern. Every year, the highest amount of money is taken out around the beginning of the new tax year. It’s like a little spike on a graph.

What are the experts saying?
Steven Cameron, from Aegon, had a few things to say. He’s noticed that many people seem to like the flexibility these pension freedoms provide. This means they enjoy having choices in how and when they take out their money. In the last quarter of 2019, there was a record of 828,000 payments made.

He also mentions that, despite all the changes and uncertainty with things like Brexit, people are not rushing to buy ‘annuities’. An annuity is like a special deal where you give a company a lump sum of your pension, and they promise to give you a set amount of money every year for the rest of your life. But with low interest rates, these annuities aren’t paying out as much as they used to, so they don’t seem as attractive.

Steven finishes by reminding everyone that retirement planning is really important. With people living longer, we need to make sure we’re smart with our money. Especially if people decide to stay invested in things like stocks, which can go up and down a lot. If they aren’t careful, they might end up using all their money too quickly. That’s why he suggests people get professional advice to help them make the best decisions.