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Over 230,000 people have withdrawn money from their retirement savings, since pension freedoms were introduced a year ago.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It did not become compulsory for pension funds to report to HMRC when cash is withdrawn until this month. As a result, 179,000 people were reported to have withdrawn money from their pensions in the third quarter of 2015 alone, whilst it is estimated that 74,000 people withdrew a total of £820m from their pension savings in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
Pensioner bonds deadline extended by three months
09/02/2015 The Government backed pensioner bonds are set to be extended for another three months thanks to their enormous popularity, Chancellor George Osborne has said. The deadline to apply for the pensioner bonds, which offer competitive rates of up to 4% interest, will be extended until May this year. The bonds have been incredibly successful with more than £1 billion worth of bonds sol...
Read MoreBT looks to clarify crown guarantee
This week will see a very important case come to court in a move instigated by the trustees of the BT pension scheme who are looking to clarify the extent to which the UK government would underwrite the pension scheme via its "crown guarantee". Both BT and the trustees of the BT pension scheme have been in talks for some time about reducing the £9 billion deficit which has built up over the last...
Read MoreConservative party refuses to bail out Pension Protection Fund
A Conservative government would not underpin the financial liabilities of the Pension Protection Fund (PPF) according to the shadow pensions minister Nigel Waterson. While this headline will make uncomfortable reading for many in the UK who are concerned about their employer pension scheme, there is a reason why the authorities would not automatically underpin compensation payments funded by the P...
Read MorePension ‘predators’ websites suspended
25/07/2014 Regulators have suspended the websites of 18 ‘predators’ who run schemes aimed at getting people to try and gain early access to their pension. A person can only access their pension without having to pay heavy tax fees once they turn 55 years old, with the exception that a person is in serious ill-health. However, there are a growing number of schemes that aim to work around...
Read MorePensions nightmare awaits millions in UK
A series of authoritative reports in UK have cast serious doubts on the potential for the UK pensions sector to deliver in the future. It was also revealed that the gap between private sector pensions and public sector pensions is larger now than it ever has been with those in final salary schemes guaranteed a set pension paid for by the taxpayer. The significant reduction in investment returns ov...
Read More