According to new data from HMRC, a total of 264,000 savers withdrew £1.9 billion from their pensions during the last quarter (Q4) of 2018 - up 26 per cent on the same period the previous year. However, the research found the amount that was getting withdrawn from a pension had fallen by 30.5% from 2016.
The data revealed that the average pension freedoms withdrawals per person had dropped to a record low since pension freedom laws were introduced back in April 2015. In its first year, the average withdrawal was over £18,000. In Q4 2018, however, the average amount withdrawn was only £7,197 – down from £7,597 in Q3 2018.
Since the reform was launched in 2015, around £23.6 billion has been flexibly withdrawn from retirement pots. During 2018, £7.8 billion was withdrawn over 2.3 million payments, exceeding the previous year by £1.3 billion and 614,000 in payments.
It has been claimed that the decline could be in response to badly-performing stock markets.
Pensions director at Aegon, Steven Cameron, suggested that those over the age of 55 are being responsible with their money:
“The freedoms have changed the way people think about retirement and are enabling the rise of a more flexible transition into retirement whereby people start accessing some retirement savings to support a reduced working pattern.”
However, communications director at Just Group, Stephen Lowe, warned that the figures from HMRC do not include billions of pounds of tax-free cash payments or small pot withdrawals. Lowe concluded:
“There is nothing in these figures that ought to make us believe everyone making pension withdrawals properly understands the tax implications of their actions, the restrictions they are now subject to, or the longer-term consequences of withdrawing money.”