Savers withdraw £1.7 billion under pension freedoms

Savers withdrew a total of £1.7 billion from their pension pots in the first quarter of the year under the new pension freedoms – a 6% increase on the previous year.

Over half a million payments were made to 200,000 people, taking the total amount withdrawn since the freedoms began in April 2015 to £17.5 billion.

Withdrawals

According to HMRC the withdrawals cover ‘flexible payments’, which include full or partial withdrawals, flexible drawdowns and building flexible annuities.

Senior analyst Tom Selby from A J Bell said: “Three years on from the launch of the pension freedoms we are beginning to get a clearer picture of how savers are using the flexibilities.

Signs

“Average withdrawals per quarter ticked up slightly, but remain well below the levels seen in the first 12 months. While there are signs some people may be taking too much too soon from their retirement pots, there is no clear evidence this is a widespread problem.”

Stephen Lowe, of Just Group, urged caution over reading too much into the figures as they are not comprehensive.

Other sources

He said: “We know from other sources that the over 55s are taking large amounts of tax-free cash using flexi-access drawdown, which is not included in the data reported, nor is the tax-free cash element of uncrystallised lump sums.

“On top of this, purchases of guaranteed income for life solutions and any withdrawal from pre-2015 capped drawdown accounts are not included.”

Pensions dashboard

Looking forward, experts are predicting the new pensions dashboard currently under development could be inundated with requests from 15 million consumers as soon as it goes live.

The planned dashboard will allow savers to see all of their pension pots in one place, helping them to plan more effectively for their retirement.

Research

Technology provider Origo says it has combined its own research with discussions it has had with the providers and banks who provide the customer facing platforms.

It claims the infrastructure must be designed to cope with ‘significant volumes of consumers’ from Day One and be flexible enough to cope with peaks and troughs in usage.  Pensions minister Guy Opperman has committed to having the system up and running by the end of 2019.

Imperative

Origo managing director Anthony Rafferty says: “It is imperative that the industry is able to deliver and maintain all the underlying services and data in a way that is secure, robust and scalable to handle 15 million consumers.

“So, whether there is one or multiple dashboards from launch, as is still being debated, the underlying infrastructure must be flexible to cope with future technological requirements.

“Over time, demand for the service can only grow as more people join workplace pensions, particularly through auto enrolment, and those also wishing to check on their state pension.”