Over 230,000 withdraw money from pensions
27/04/2016
Over 230,000 people have withdrawn money from their retirement savings, since pension freedoms were introduced a year ago.
In April 2015, the government introduced a range of pension freedoms to allow anyone aged over 55 to take money out of their pension pot, and only pay income tax. Prior to April 2015, those looking to withdraw money from their pension had to pay a 55% tax charge.
Since the freedoms were introduced, the Treasury has suggested that 232,000 people withdrew around £4.3bn from their retirement funds.
These figures include those taking flexible drawdown, where a person takes a regular income from their savings, which would remain invested. Annuities were also included within the figures, which is the traditional method of funding a retirement, where a person sells their pension pot to a third party in return for a guaranteed income for life.
Not comprehensive
These figures are actually much smaller than what the Financial Conduct Authority (FCA) had originally predicted.
However, it has been suggested that pension funds underreporting to HMRC could have affected the figures, leading to the Treasury admitting that the figures were “not comprehensive”.
It did not become compulsory for pension funds to report to HMRC when cash is withdrawn until this month. As a result, 179,000 people were reported to have withdrawn money from their pensions in the third quarter of 2015 alone, whilst it is estimated that 74,000 people withdrew a total of £820m from their pension savings in the first three months of 2016.
Originally, there were fears that people would cash in their pension pots and spend their money too quickly. However, the FCA has claimed that the majority of people have used withdrawals to buy an income, whilst the pots that have been fully cashed in are generally only small pension pots.
Harriet Baldwin, economic secretary to the Treasury said: "It's only right that people should have a choice over what they do with their money and in their first year our successful pension freedoms have already given thousands of people access and responsibility over their hard-earned savings."
Need financial advice?
If you have any personal finance questions related to this news article, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.
Share this..
Related stories
PPI report highlights pensions gap
Public sector pensions remain far more generous than their private sector equivalents, new analysis has shown.The Pensions Policy Institute (PPI) said that the typical private sector pension pot is equivalent to 21 per cent of salary.It added that, while defined benefit private sector schemes averaged 20 per cent of salary, the more commonly-found defined contribution plans came to just seven per...
Read MoreHave you thought about your pension?
It is becoming more and more apparent that the gap between the haves and the have-nots is set to grow dramatically in the UK over the next few years. Already we have seen signs that those with assets will need to downsize and dispose of some of these assets to fund their retirement, while those who have relied upon the state for many years will still be supported in the future. So have you thought...
Read MoreHave you looked at your pension arrangements of late?
It is surprising to learn how many people in the UK have a figure in mind they would like to earn on their retirement but many have pension funds which are well underfunded and will earn nowhere near the kind of income they expect and need. How many of us actually know the calculation required to see what income your pension fund would bring in? How many of us have actually reviewed our pension ar...
Read MoreEco Friendly At All Costs?
There are really fears that the government’s obsession with the eco-friendly housing could take away the rights of the inhabitants of Coltishall to vote on the proposed eco-friendly development at the former RAF base. While the population of Coltishall were originally given until the 30th June to put forward their comments it now appears that the authorities are looking to skip t...
Read MorePension changes could leave many without cash
12/01/2015 The charity Age UK has warned that the pension changes coming in April could leave significant numbers of older people running out of money in retirement. The new rules mean anyone over the age of 55 can take as much money as they like out of their Defined Contribution schemes, at lower tax rates. Age UK believes with the new rules pensioners may run out of money by age 75 years....
Read More