Pension freedoms were launched in April 2015. In the second quarter of 2017, more people are accessing their pensions, with over 200,000 people withdrawing sums totaling £1.86 billion between April and June. This is an all-time high since the pension freedoms were introduced.
Pension freedoms allow retirement savers who are 55 years and over to withdraw from and spend their pension pot whenever and however they like.
However, as more people are accessing their pensions, they are taking less out of them, according to the latest figures from HMRC. The average sum has decreased to £9,500 this year, down from £18,500 in 2015. Does this mean people are becoming more sensible regarding their retirement pots?
Some people argue that it’s too early to draw any conclusions about the long-term effects of pension freedoms, as there is still a substantial amount of time for the pension pots to be used up. However, for now, accessing pensions early appears to be “the new norm”, as the Financial Conduct Authority reported that 72% of people accessing their pension pots are under 65.
Earlier in July, the FCA reported that more than half of pension pots that had been fully withdrawn were actually put into investments, including cash ISAs. They also reported that many people who were withdrawing lump sums early were not taking advice beforehand.
The FCA’s research has also found that many people were questioning their decision on taking money from their pension due to size of the fund that is needed to deliver a basic income to the saver. Here, it’s important that people seek advice when they are considering their options regarding pensions and pension freedoms to ensure the right decision is made.
If you’re looking for financial advice regarding pension freedoms and what this means for your savings, talk to our financial advice team. Please call on 01926 492406 or email firstname.lastname@example.org to make an appointment.