Flexible pension access surpasses £6.1bn
Some 159,000 people withdrew £1.77 billion from their pensions between April and June this year – the biggest amount on record - new data reveals.
In total, over a quarter of a million payments were taken in the second quarter of 2016, either through drawdown access, or by people cashing in their pensions in full.
At least £6.1 billion in total has so far been withdrawn from pensions under the new pension freedoms introduced in 2015, though the true figure will be higher than this because until now, providers haven’t had to disclose this data (see below for more on this.)
Tom McPhail, head of retirement policy at Hargreaves Lansdown says: “The data illustrates how popular this type of retirement income planning has become. It corresponds to a significant decline in annuity sales, indicating that for many people for now at least, drawing cash directly from your pension fund is the new normal.”
However, Mr McPhail adds that he is worried some people aren’t shopping around to get the best deal from a drawdown provider. He says often people stick with their existing provider because it seems easier, but warns that those who do “may miss out on better deals and services which are available elsewhere.”
Pension access likely to be higher than figures suggest
Pension companies previously only published access figures on a voluntary basis, however since April 2016 disclosure has been compulsory.
This means that while today’s figures (see the table below for a summary) for the last three months are the highest on record, this data is likely to be skewed as providers may not have disclosed the full data in the past.
Flexible pension access is also only likely to rise over time as more people become aware of the new flexibility and more companies offer it. Additionally, as more people enter drawdown, payment and user figures will rise over time.
HMRC is expected to publish further analysis in the coming weeks to gauge if access is rising or falling.
(Click the table below to enlarge)
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.