Thursday, May 28, 2020

Pension freedom drawdowns soar to £1.8 billion record

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New pension freedom figures show 159,000 retirement savers accessed a record £1.8 billion in the run up to the Brexit referendum.

HM Revenue and Customs (HMRC) revealed the numbers for the second quarter of 2016.

The statistics show a massive increase in over 55s taking advantage of their pension freedoms compared to the first three months of the year.

Between January and March, HMRC reported 74,000 retirement savers withdrew £800 million from their pensions.

Earlier figures suggested that fewer over 55s were taking money from their pensions.

Between October 2015 and the end of March, retirement savers took £1.6 billion.

Popular choice for retirement savers

The figures exclude over 55s only taking their 25% tax-free pension lump sums rather than extra money.

HMRC also disclosed that 2.7 million retirement savers had contacted the free Pension Wise service for financial advice.

Economic Secretary to the Treasury Simon Kirby said: “It’s only right that people should have a choice over what they do with their money and today’s figures show that pension freedoms continue to be a popular choice.

“Our pension reforms have already given hundreds of thousands of people access and responsibility over their hard-earned savings and we will continue to make sure that the pension freedoms work well for everyone.”

Brexit influence on pension withdrawals

HMRC offers some reasons for the larger than expected pension freedom uptake.

They included better data collection from pension providers who now have to give HMRC compulsory details about withdrawals. Until April, when new reporting rules started, passing the information was optional.

Anecdotal evidence also suggests that many raced to withdraw their cash as a result of the June 23 Brexit referendum due to financial uncertainty.

Former Chancellor George Osborne introduced pension freedoms in April 2015.

The measure allows retirement savers aged 55 years old and over to access their pension cash as and when they wish and to spend the money how they like.

Savers with pensions worth more than £30,000 have to seek professional financial advice about how to access their money. Millions have done so through Pension Wise.

Pension freedom options include withdrawing pension cash in one go, leaving the money invested to provide and income or buying an annuity.

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