Over 230,000 withdraw money from pensions
Over 230,000 people have withdrawn money from their retirement savings, since pension freedoms were introduced a year ago.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.
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It did not become compulsory for pension funds to report to HMRC when cash is withdrawn until this month. As a result, 179,000 people were reported to have withdrawn money from their pensions in the third quarter of 2015 alone, whilst it is estimated that 74,000 people withdrew a total of £820m from their pension savings in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.
Massive growth in public sector pension millionaires
A Freedom of Information Act request has revealed a phenomenal rise in the number of "public sector pension millionaires" over the last few years. Based upon the fact that a £33,000 a year pension would require a pension fund of over £1 million on the open market, a staggering 34,000 public sector workers are alleged to be effective "public sector pension millionaires". This is a damning indictm...Read More
UK pension increase not enough
The National Pensioners Convention has today come out in support of pensioners across the UK , many of whom are up in arms about the meagre 5% increase in the state pension. As we covered in one of our earlier post, the full basic state pension has risen to £95.25 although for those without a full National Insurance record the figure is a much lower £57.06. However, when you take into account th...Read More
Have you considered your pension fund arrangements?
As the controversy regarding the UK budget continues to die down many people are now looking towards the future and their pension fund arrangements. However, there are a growing number of people in the UK who have either ditched their short-term pension arrangements or not even considered them. These are the people who will suffer severely as the value of the UK state pension continues to fall in...Read More
Do I need a pension?
Many people don't take the opportunity to arrange a pension plan. There are other things in life, particularly at a young age, which people would find more important than organising a pension. This is perfectly normal, but a major role of a financial advisor is to ensure the protection of a person’s long term financial future, and starting a pension scheme is one way of doing this.
UK public companies boosted by potential pension funding change
Shares in BT, British Airways and ITV were fairly buoyant towards the end of last week amid news that the Pensions Regulator may be taking a softer stance on pension deficits. The three companies mentioned above have particularly large pension fund deficits, due in the main to a fall in the value of property and the UK stock market, which had led to fears of financial problems in the short to medi...Read More