Retirement savers have accessed approximately £23.6 billion through pension freedoms since reforms were introduced in April 2015, according to data from HM Revenue and Customs (HMRC).
Its Flexible payments from pensions: January 2019 report also found that the number of individuals who have received flexible payments from their pensions between the second quarter of 2018 and the fourth quarter of 2018 is 448,000. This is compared to 375,000 between the second quarter of 2017 and the first quarter of 2018, and 393,000 between the second quarter of 2016 and the first quarter of 2017. A total of 232,000 individuals received flexible payments from their pensions between the second quarter of 2015 and the first quarter of 2016.
Since the introduction of pension freedoms in April 2015, more than one million individuals have accessed their pension for flexible payments. A total of 5.9 million payments have been made since April 2015.
Between October and December 2018, 628,000 payments were received by 264,000 individuals, totalling £1.9 billion. This compares to 585,000 payments to 258,000 individuals in the third quarter of 2018, at a total of £1.9 billion again. From April to June 2018, 574,000 payments were made to 264,000 individuals, totalling £2.3 billion. Between January and March 2018, 500,000 payments were made to 222,000 individuals, amounting to £1.7 billion.
Alex Waite, partner at LCP, said: “The latest figures show a continuation of the trend of more people choosing to withdraw their defined benefit pensions under the government’s freedom and flexibility policy. This will be the right decision for certain individuals and 2018 was yet another record year for the number of transfers.
“However, at the same time, we are seeing many people having their freedoms capitalised on by fraudsters, which remains a huge concern for the pensions industry. The recently introduced ban on telephone cold-calling from the UK is a helpful start, but the scammers have moved online and overseas and more is needed to protect vulnerable people reaching retirement.
“The Work and Pensions Select Committee recommended, in its report on pensions freedoms published last April, that there should be a default decumulation pathway, but the government rejected this concept. Having encouraged pension savings, through auto-enrolment, the government also needs to introduce a coherent policy regarding what happens when it is time to turn those savings into a retirement income.”
The figures are based on data reported to HMRC. Individual numbers are rounded to the nearest 1,000. The yearly individual totals are lower than the sum of the quarterly individual numbers, as some have taken payments in multiple quarters.
Reporting was optional up to April 2016, when it was made compulsory. For this reason, figures prior to this are not comprehensive. This may account for part of the increase in reported payments seen in the second quarter of 2016.
Kay Ingram, director of public policy at LEBC, added: “We are highly concerned that those who have [accessed their pension for flexible payments], without the benefit of regulated advice, may have paid unexpected stealth taxes and will be restricted from pension saving in the future.
“Given the rise in non-advised drawdown from 5% before the introduction of pension freedoms to 32% today, we would like to see a 30-day cooling off period introduced while the tax and savings consequences of flexible drawdown are made clear. People deserve the facts prior to making a decision, not after, when it is too late to reverse their decision. We very much hope the [Financial Conduct Authority’s (FCA)] Retirement outcomes review will seek to rectify this with a cooling off period for non-advised consumers.”