Recent research has indicated that pension withdrawals recently hit the highest quarterly figure since they were introduced.
According to data from the HM Revenue & Customs, 200,000 individuals withdrew a combined total of £1.86 billion from their pension funds during the second quarter of 2017. Despite this record high amount, the statistics also revealed that the average amount released per person appears to be declining.
Commenting on the figures was Stephen Lowe. The group communications director at Just highlighted the lack of clarity in what the results truly mean, as well as a need for consumer guidance on the issue.
“In its recent Retirement Outcomes Review interim report, the FCA said taking pension money early has become the ‘new norm’ with nearly three-quarters of pots accessed by people under 65, most of whom took lump sums.
“We still lack evidence to know whether this level of withdrawal is healthy or should be worrying. The FCA’s research found many people who thought they were doing the right thing by taking pension money had a ‘penny drop’ moment and questioned their decision when confronted with facts about life expectancy and the size of fund needed to deliver even a basic retirement income.
“The FCA noted that information delivered face-to-face was likely to be most effective at preventing people from acting first and thinking later. There is a strong case for defaulting people into impartial free guidance unless they specifically opt out, particularly where it is delivered through personal interaction with a specialist rather than just as a leaflet or checklist.”
Steve Webb agreed with the need for appropriate guidance, as well as highlighting the difficulties that future governments would have in reversing the policy, given its popularity. The Director of Policy at Royal London stated: “These figures show that more and more people every quarter are taking advantage of the new pension freedoms. From under 100,000 in the second quarter of 2015, the number has more than doubled in two years. Any future government would find it politically impossible to reverse this policy which is now a significant part of the retirement planning of large numbers of people. The priority for regulators must be to ensure that people are given the right guidance and advice to make best use of these freedoms.”
